China’s inflation remained at the coolest level in eight months, leaving room for policy-makers to strike a balance between reforms and economic growth.

The Consumer Price Index, the main gauge of inflation, expanded 2.5 percent in January from a year ago, the National Bureau of Statistics said yesterday.

The pace was the same as that in December, which was the lowest since May.

The Producer Price Index, the factory-gate gauge of inflation, fell by 1.6 percent last month, widening from 1.4 percent in November. The reading has been in the negative territory for 23 months, the longest streak since 2000.

“Moderate inflation leaves room for monetary policy easing, but we believe the People’s Bank of China will keep a tight policy stance, at least through the first quarter, as it seems comfortable with the pace of current economic momentum,” Nomura Securities said in a note yesterday.

The note said China’s GDP growth will slow to 7.5 percent in the first quarter and 7.1 percent in the second quarter.

Analysts are concerned about domestic demand because of rising financing costs.

NBS analyst Yu Qiumei attributed the modest CPI to declines in pork prices as “pork supply increased and demands were tamed under campaigns against extravagance.”

Vegetable and fruit prices both jumped more than 10 percent year on year in January, lifting the CPI reading, sub indices showed.

Industrial Bank’s chief economist Lu Zhengwei said he expected food prices to decline after February as the January data suggested weak consumption even ahead of the Chinese New Year, a traditional peak season.

On PPI, Yu said the decline was partly due to slower business activities ahead of the Lunar New Year that started on January 31.

Zhu Haibin, chief China economist at J.P. Morgan, said he expected PPI to return to the positive territory around mid-2014, but he warned that it may take much longer to address the structural problems of overcapacity in certain manufacturing sectors.

The inflation data was released among mixed economic indicators.

While several January Purchasing Managers’ Index revealed slower expansion in manufacturing and service industry activities, the stronger-than-expected trade data released on Thursday signaled strengthening demand.

China’s slowing growth is largely due to the economic restructuring, and analysts said it was right to address the problems of overcapacity and low investment efficiency.

The World Bank has lowered its expectation of China’s 2014 economic growth to 7.7 percent from the previous 8 percent, reflecting deleveraging and less reliance on policy-induced investment.

China is to forge ahead with reforms this year while maintaining stable economic growth by sticking to a proactive fiscal policy and a prudent monetary policy, the central government decided last December.

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