Inflation in China is likely to come back in the second half of the year after a five-month decline in prices, the People’s Bank of China (PBOC) said on July 28.

Chinese economists have warned that the government’s massive economic package might ignite a rise in consumer inflation. Meanwhile, officials say the government is watching the consumer price index (CPI) closely.

Generally, the CPI will be steady in the second half of the year but there is the possibility of upward pressure, the PBOC said in its quarterly report on the nation’s economic situation.

Consumer prices declined in June for a fifth consecutive month, dropping 1.7 percent from the same period last year.

The bank said its analysts expected the decline in prices to bottom out in the third quarter, which ends in September. Most the analysts say the threat of inflation for food and consumer goods is modest.

The economic stimulus package and an investment boom fuelled by a surge in lending by Chinese state banks helped to boost second-quarter economic growth to 7.9 percent from 6.1 percent in the previous quarter.

The central bank confirmed the estimates of private sector analysts that the economy will grow by 14.9 percent in the third quarter. It promised to maintain policies to ensure a steady economic recovery.

The report also noted that in the next phase, the Chinese government should continue to maintain the continuity and stability of its macroeconomic policy and consolidate the foundation for an economic recovery./.