"If we peel off inflationary factors inherited from last year, which is about 3.4 percent, the margin we need to hold down through macro-management is only 1.5 percent. That's not high at all," said Zhang Liqun, a researcher on macro-economy with the Development Research Center of the State Council, China's cabinet.

He said the price index would be kept down gradually, as factors such as the severe winter weather that pushed up the January CPI to 7.1 percent, receded with the reconstruction efforts.

Last year, China hiked interest rates six times as part of its attempt to tame inflation and cool the economy. Experts said that such measures took time to work and predicted that commodity prices would stabilize after June or July, when demand for farm produce was better met.

"Commodity prices will be kept down in the latter half of the year, through increasing subsidies and investment in agriculture to restore supplies of farm produce like pork," said Li Daokui, director of the Center for China in the World Economy at Tsinghua University and a member of the Chinese People's Political Consultative Conference (CPPCC).

Along with the new inflation control target, Wen announced a series of measures on Wednesday, including expanding production of grain, meat and other items, restricting the industrial use of grain and grain exports, increasing imports of consumer goods that are in short supply and aiding the low-income population.

Provincial governors and mayors will be held responsible for the supply and prices of grain and non-staple foods, he added.

(Xinhua News Agency March 6, 2008)