CHINA'S inflation slowed sharply last month with food costs easing under tight monetary policies -- but the country's firm grip on credit may soon change, analysts said.

The Consumer Price Index, a main gauge of inflation, expanded 5.5 percent from a year earlier in October, the National Bureau of Statistics said today.

The index extended its moderation trend to a third consecutive month, and the pace came in as the slowest since May. In September, the inflation rate still hung onto a high of 6.1 percent.

"The CPI growth cooled sharply as expected," said Lian Ping, chief economist at Bank of Communications. "The future slowdown may be faster than our previous projection."

Lian said earlier the inflation rate might reduce to 4 percent in December and settle at 5.5 percent for the whole year.

Food costs, a major force driving prices up during this inflationary cycle, jumped 11.9 percent year-on-year last month, down from 13.4 percent in both September and August.

Production inflation pressures also eased, with the Producer Price Index, a factory-gate measurement of inflation, cooling markedly to 5 percent in October from 6.5 percent a month earlier on sharp corrections in global commodity prices.

"The easing inflation provides more room for monetary policy flexibility," said Chang Jian, an economist at Barclays Capital. "But the possible change will remain selective because the slowdown is not sufficient for a broader easing."

Chang said more clarity on policy direction would be seen at the annual Central Economic Work Conference to be held next month.

Other analysts expected that China might start reducing the reserve requirement ratio, which now orders commercial banks to set aside a record 21.5 percent of capital as reserves.