Key Points：

    Inflation is indeed increasing. We predict consumer prices in June will be up by 4.3%.

    This year’s high CPI is actually due to last year’s low price level of food.

    An interest rate raise cannot help to relieve the rocketing food prices resulted from cost-push inflation.l A more practical way is to cut the tax on interest income by half, from 20% to 10%. Or, the government may even abolish it.

    The only concern may be from the growth of fixed asset investments.

    Bank loans in June went up significantly, compared with those in previous years. We think this may be related to local government reelection during the first half.

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