CHINA'S inflation in December may moderate due to tighter policies which were launched to trim liquidity and battle price speculation, according to analysts.

Economists and financial institutions have forecast the Consumer Price Index, the main gauge of inflation, to rise 4.3 percent last month from a year earlier. November's inflation was 5.1 percent, which marked a 28-month high.

The National Bureau of Statistics is scheduled to release the December data in the middle of this month.

But the moderate rise in CPI does not mean less inflationary pressure, which will extend into the second quarter of this year, analysts said.

"Food prices have seen a slowdown in growth since December," said Dong Xian'an, an analyst at Industrial Securities Co. "The government's tougher measures in combating speculation have proven to be effective."

According to the National Development and Reform Commission, prices of vegetables fell 3.9 percent from a year earlier in the four weeks from November 29, but pork costs climbed 10.7 percent during the period and eggs jumped 19.6 percent.

In November, food costs, which make up a third of the CPI basket, surged 11.7 percent year on year, with fruit prices soaring 28.1 percent, eggs 17.6 percent, cooking oil 14.3 percent and rice 11.7 percent.

Dong projected food prices to expand 9 percent in December and overall CPI will grow 4.4 percent.

Sinolink Securities Co said in a note that consumer prices may grow 4.1-4.3 percent in December.

"Inflationary pressure will remain high in the coming months," Sinolink said. "Prices of daily necessities may pick up further in the Spring Festival.''

Wang Qing, a Morgan Stanley economist, said the government needs to further tighten policies to control inflation.

"We expect the trajectory of inflation to show the pattern of 'rising in the first half but falling in the second half in 2011,'" Wang said.

"The policy tightening will be front-loaded to the first half of this year in the form of two to three interest rate increases."