Short-term inflation will hinge much on the movement of food prices in global markets, Acting Financial Secretary Carrie Lam says, adding the impact of the recent Sichuan earthquake on food prices remains to be seen.

Mrs Lam today told lawmakers the persistent high price of crude oil and other commodities in world markets, the weak US dollar, the appreciation of the renminbi and the sustained strength of the local economy will continue to exert inflationary pressure for some time.

"The underlying inflation rate for 2008 is forecast at 4.5%. If, however, the alleviation effect of the various measures to help lower the Composite CPI is taken into account, the forecast headline inflation rate for 2008 is 3.4%.

"The Government is aware of upside risks to these forecasts and will continue to monitor the situation closely and review inflation forecasts as more incoming data becomes available."

On the earthquake's impact on food prices, Mrs Lam said hard-hit Wenchuan county is not a major food and industrial area.

"Sichuan is not a major source of food imports to Hong Kong. While the province is the largest producer of pork on the Mainland, pigs consumed in Hong Kong mainly come from Guangdong, Jiangxi and Hunan, with Guangdong accounting for half of the supply."

On frozen pork, the monthly supply from Sichuan is 1,200 tonnes. It is estimated the quake will result in a reduction of about 500 tonnes, which only accounts for 3% of the supply of frozen pork to Hong Kong.

To make up for the shortfall Mainland authorities will increase the supply of pork from other provinces. The food supply to Hong Kong has been generally normal since the May 12 quake, she added.