A senior official from the country's top economic planning agency signalled caution ahead, saying inflation was likely to stay high in coming months. Inflation peaked at a 37-month high of 6.5 percent in July, driven by high food prices caused by strong demand and summer flooding that damaged crops. Analysts expect inflation to ease as the autumn harvest comes in, though the government says it will overshoot the official 4 percent target for the year. Beijing has promised more bank lending to help small and private companies, but says credit and investment curbs imposed to cool a real estate boom that has driven up housing costs will stay in place. The credit clampdown has helped to slow the rise in housing costs but has hurt the real estate and construction industries, which account for about 10 percent of China's economic output. While most analysts rule out an immediate cut in interest rates, there is more debate on when the central bank might reduce bank reserve ratios. At 21.5 percent, the RRR is at a record level for big banks. Analysts at ANZ believe the economy is deteriorating so quickly that the PBOC could imminently start to ease policy by reversing some of the nine hikes to RRR made in the tightening cycle that began in October 2010. Annual economic growth rates have fallen for three straight quarters. Analysts forecast growth would slow to less than 9 percent next year for the first time in a decade.
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