BEIJING, Jan 12 Reuters China39;s annual consumer inflation rate accelerated in December, driven by rising food prices even as domestic demand wavered amid restrained economic activity.

Economists expect inflation to continue to pick up in the first quarter of 2023.

The consumer price index CPI in December was 1.8 higher than a year earlier, rising faster than the 1.6 annual gain seen in November, data from the National Bureau of Statistics NBS showed on Thursday. The result matched a Reuters poll estimate of 1.8.

The annual rate fall in the producer price index PPI slowed in December to 0.7 from the 1.3 seen in the previous month. Economists in a Reuters poll had expected a 0.1 decline, reflecting disruption of industry by a high number of COVID19 cases towards the end of 2022.

China abandoned its strict zeroCOVID measures last month, lifting lockdowns, removing quarantine and halting regular testing. As a result, economists expect inflation to continue to accelerate in the first quarter.

There are some early signs that the transition toward living with COVID is starting to put upward pressure on prices, said Zichun Huang, economist at Capital Economics. But the uptick in inflation is unlikely to be as large as that seen in many other economies as they reopened.

Analysts do not expect rising inflation to prompt a rise in interest rates.

As inflation will remain manageable over the foreseeable future, we think the People39;s Bank of China will need to lower the…