China's tightening pause to be temporary: Analysts

China's central bank will re-assess its tightening policies in the wake of Japan's earthquake, but any pause will be temporary because inflation remains elevated, analysts said on Friday.

A series of analysts told Reuters that the People's Bank of China would stay pat on interest rates until early April when inflation data for March will be available.

At that point, it is likely to resume tightening, including increasing required reserves and interest rates, because inflation will accelerate in the coming months, they said.

"The earthquake won't disrupt China's policy, although the pace of tightening could be slowed as authorities need to watch price trends before taking further steps," said Wang Jun, economist at CCIEE, a top government think tank.

"Inflation is still a clear problem. There is little sign it has been brought under control," he said, predicting at least two more increases of banks' reserve requirements and one increase of benchmark interest rates.

But Qing Wang, China economist at Morgan Stanley in Hong Kong, said the official concerns about slowing economic growth could forestall any aggressive move.

"The government is unwilling to send strong tightening signals at this stage," he said.

The Chinese commerce ministry's official newspaper said earlier this week that Japan's earthquake and tsunami would only be a temporary drag on growth.

China's top leaders have declared that their priority this year is to control inflation, wary that fast-rising prices could breed social discontent.

With inflation running near its fastest in more than two years, Beijing has raised banks' reserve requirements five times and interest rates three times since October.

There are signs that the government has started to make progress. The central bank on Monday reported sharply lower bank lending growth last month, which will help reduce inflationary pressure.

But with oil prices holding above USD 100 a barrel, China is, like other countries, facing a big risk of imported inflation.

The official China Securities Journal quoted analysts as saying that a "window" for another interest rate rise could come open in the second quarter.

Annual inflation could peak near 5.5% in April before easing to around 4% towards the year-end, the newspaper quoted an unidentified central bank official as predicting.

A revival of the central bank's regular open market operations, helped by rising yields on central bank bills, could delay further rises in reserve requirements.

Cui Yong, an analyst at Guangfa Securities, said that slowing capital inflows as China's trade surplus narrowed was another factor in delaying the next round of tightening.

Writing in the China Securities Journal, he said there was little chance of interest rate or reserve requirement increases in March, predicting that would wait until the second quarter.