The lower-than-expected consumer inflation in July should allow Chinese policymakers to breathe a little sigh of relief now.

Latest statistics show that China's inflation cooled for a third month, dropping from 7.7 percent in May and 7.1 percent in June to 6.3 percent last month.

Though headline inflation remains higher than the government's annual target of 4.8 percent, it seems pretty sure that the country has so far managed to prevent runaway price gains. At a time when more and more governments are busy with fighting soaring inflation, China's success in cooling domestic price gains will definitely help anchor global inflationary expectations.

A sharp year-on-year deceleration in food prices has largely driven down China's consumer price index (CPI) growth. Food prices, which account for more than a third of the CPI calculation, soared 14.4 percent in July, 6.0 percentage points lower than the growth in the first half of this year.

With weekly data from the Ministry of Agriculture and the National Development and Reform Commission showing that food prices continued to fall in the first week of August, it is reasonable to expect that CPI inflation will decline further over the rest of the year.

The timely deceleration in inflation surely supports the government's shift in policy to emphasize the importance of rapid growth after the expansion of the world's fourth-biggest economy has slowed for four quarters.

While cooled inflationary expectations can give the government more room for measures to boost economic growth, policymakers still need to caution against a second-round inflation after food-led inflation has peaked.

Double-digit producer price inflation in July is posing a threat to stoke a rebound in consumer-price inflation.

Admittedly, as global growth slows, global commodity prices are likely to correct further in the short to medium term, easing concerns over imported inflationary pressure on China's producer prices. But China's PPI inflation may still stay high if the country presses ahead with market-oriented pricing reforms for energy products.

The hikes in fuel and electricity prices in late June and early July have not only accelerated producer inflation to the highest level in 12 years but also raised non-food CPI inflation from 1.9 percent in June to 2.1 percent in July.

Given the country's urgent need to cut energy intensity more drastically and reduce pollution, it is more than likely that policymakers will hike domestic fuel and electricity prices to a higher level that can both reflect supply and demand and encourage energy conservation.