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Shanghai (AFP) Feb 10, 2011 China's inflation could exceed five percent for the first two months of the year, a government economist has warned in comments published by state media on Thursday. The forecast by Ba Shusong would mark an acceleration from December, when the country's consumer price index rose 4.6 percent from a year earlier due to soaring food costs and higher raw material prices. Analysts have warned inflation will pick up in January and February due to increased demand ahead of the Lunar New Year holiday and extremely dry conditions across northern China, which have hit wheat and other crops. To counter rising prices, the central bank is likely to use stronger tightening policies in the first half of the year, especially the first quarter, to curb bank lending and limit inflation, Ba was cited as saying in the Financial News, a central bank-controlled newspaper. Ba is an economist with the Development Research Centre, a think tank that reports to China's State Council, or cabinet. China is scheduled to release January's inflation data around February 15. Beijing has issued a stream of policies and orders to contain price rises, particularly inflation in food and housing costs, which has a history of sparking unrest in China. The central bank on Tuesday raised interest rates for the third time in four months, as authorities fight to tame inflation. It has also raised the amount of money banks must keep in reserve a number of times over recent months. So far the measures appear to have had a limited impact. State media have reported new bank lending totalled more than 1.2 trillion yuan ($182.1 billion) in January alone -- compared with 7.95 trillion yuan for the whole of 2010. The cabinet called Wednesday for increased rice production to offset damage to wheat crops in the drought-stricken north and pledged $1 billion in spending to battle a problem the UN warned could be "very serious".
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