He predicted that the central bank will raise interest rates and the deposit reserve rate as well as scrap the tax on bank deposit interest during the latter half of the year.

Scrapping the bank deposit interest tax will be more useful than an interest rate hike for attracting household deposits and stabilizing bank reserves, when the real deposit rate is negative, according to Lin Zhaohui, an analyst at Guotai Junan Securities. The high bank deposit interest tax weakens the real effect of an interest rate hike, Lin added.

Ha Jiming, chief economist of China International Capital Co Ltd, believed food price will rise 5-10 percent this year, and CPI will keep rising but may not be out of control. As large inflation may not happen due to a fall in investment growth, there are few possibilities for a near-term interest rate hike, but another one or two hikes are still expected this year, he added.

Income from the deposit interest tax was 45.9 billion yuan last year, while the raised securities stamp tax will contribute 280 billion yuan more, so the financial revenue will not suffer a huge loss from scrapping the bank deposit interest tax, Ha noted.

It usually takes at least two months to judge if an interest rate hike has an effect, so the next hike will fall in mid-July, following the last one on May 19, said Li Huiyong, a senior macroeconomics analyst at Shenyin Wanguo Securities Co.

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