Concerns over inflation eased on major macroeconomic data for June released Thursday. Economists revised forecasts for interest rate hikes as they expected reduced risks of inflation over the rest of the year.

The market previously forecasted a continued rise in June's consumer price index (CPI) reading.

However the CPI moderated to 2.9 percent year-on-year in June from 3.1 percent in May, the National Bureau of Statistics (NBS) said Thursday. The overall price level fell 0.6 percent from May to June.

Economists attributed the fall in CPI inflation mainly to a decline in food price inflation.

Food prices went up 5.7 percent year-on-year in June compared to a rise of 6.1 percent in May.

The producer price index (PPI) in June also grew weaker than expected to 6.4 percent year-on-year, compared to 7.1 percent in May. The PPI reading dropped 0.3 percent in June over May, the first drop in 15 months.

Economists expected the CPI to peak in the near term while easing through the end of the year.

The CPI is likely to jump again in July owing to rising food prices on the back of floods in South China.

July's reading would be the peak within the year, and then the CPI is estimated to decline on a rising comparison base, said Lu Ting, an economist with Bank of America-Merrill Lynch in Hong Kong.

JPMorgan Chase has cut the forecast for 2010 average CPI inflation rate to 2.8 percent from a previous 3.2 percent, the investment bank said in a research report distributed Thursday.

"At this moment Chinese policymakers seem to believe that, as the growth momentum in the overall economy has been moderating, the near-term moderate upward trend in headline CPI inflation is tolerable for a while," the report wrote.

The economy saw a continued slowdown in growth in June, shown by a decline seen in industrial growth and urban fixed asset investment growth as well as retail sales growth, according to the NBS.

China's economic growth slowed to 10.3 percent in the second quarter from 11.9 per-cent in the first quarter.

JPMorgan cut its previous forecasts of a total of two interest rate hikes in the second half of the year to only one in the fourth quarter.

"In view of the reduced inflation risk, we revise our policy call to no benchmark interest rate hike in either the deposit or lending rate through 2010," economists Peng Wensheng and Chang Jian at Barclays Capital also said in a note Thursday.