Inflation rises, but economic activity is weak

China's consumer-price inflation remained high in July, while activity data suggest that growth was sluggish at the start of the third quarter. On the face of it, this poses a dilemma for China's policymakers. However, we continue to think that inflation concerns will ease in coming months and that global growth will be weak. The upshot is that we maintain our view that China's benchmark interest rates are unlikely to be raised in the remainder of this year.