China's inflation eased in April to 5.3 per cent and other data, including industrial output and loans, suggested slower activity in the world's second-biggest economy and less room for further aggressive moves to tighten monetary policy.

Inflation was slightly higher than expected but lower than a 32-month high in March of 5.4 per cent, underlining expectations that price pressures were peaking and would start to ease in the second half of 2011.     

The annual pace of industrial output and retail sales eased more than expected, backing the view that the heady 10-percent plus pace of economic growth last year is calming. Annual food price increases, the main driver of overall inflation, pulled back to 11.2 per cent in April from 11.7 per cent in March.

"Price pressures are still uncomfortably strong, but there are some signs in today's data that policy measures put in place over the last six months or so are having an impact," said Brian Jackson, economist with Royal Bank of Scotland in Hong Kong.

Jackson said inflation remained high enough to warrant two more increases by the central bank in interest rates and further yuan appreciation against the dollar.

But several analysts said other data released on Wednesday, including figures that showed a slowdown in the pace of money supply and bank loans outstanding, suggested that the central bank could be less aggressive with monetary tightening in the months ahead.

"The April economic indicators make it less likely that the central bank will raise required reserve ratios or interest rates. I believe the central bank will, at most, raise reserve requirements once in the coming two months," said Shao Yu, an economist with Hongyuan Securities in Shanghai.

The central bank has raised interest rates four times since last October and banks' reserve requirements seven times, which has meant big banks have a record 20.5 per cent in deposits tied up. Those funds could otherwise become loans.

Markets showed little reaction to the data.

China's industrial output in April rose 13.4 per cent from a year earlier, easing from a pace of 14.8 per cent in March, the National Bureau of Statistics said. Output had been forecast in a Reuters poll to rise by 14.7 per cent. - Reuters