The increase in China's consumer price index (CPI), the main gauge of inflation, is likely to slow to 6.1 percent in September, a report from Bank of China says.

The nation's CPI jumped 6.5 percent in August, the highest monthly rise in 11 years, mainly due to food price hikes.

The slowdown in inflation would reduce the urgency to raise interest rates by the People's Bank of China (PBC), or central bank, Tuesday's Shanghai Securities News reported, citing the report.

The PBC, however, may continue to raise the interest rates amid efforts to bring the deposit rate into positive territory and curb the high asset prices.

The report also stated that China's broad measure of money supply, M2, which covers cash in circulation and all deposits, may grow by 17.5 percent in September, lower than 18.09 percent in August.

China International Capital Corp. (CICC) predicted in a report that the CPI would slow in the fourth quarter after remaining high in September and October.

The CICC also said the central bank may raise the interest rates once or twice in the fourth quarter.

The Chinese authorities would allow faster appreciation of local currency, raise the deposit reserve requirement ratio further, conduct more open market operations and use administrative orders to rein in bank loans growth and excess liquidity, according to the CICC.

The PBOC has raised the deposit and lending rates five times and the reserve requirement ratio, now at 12.5 percent, seven times, each time by 0.5 percentage points, since the beginning of the year.

(Xinhua News Agency October 9, 2007)