(Adds details, reaction)
By Langi Chiang and and Chen Min
BEIJING, Dec 11 (Reuters) - China's consumer price inflation fell to a 22-month low of 2.4 percent in November, giving the central bank free rein to cut interest rates further to offset an abrupt slump in the world's fourth-largest economy.
Economists had expected inflation to moderate to 3.0 percent from 4.0 percent in the year to October. In the event, the reading was the lowest since January 2007.
Nie Wen, an analyst with Huabao Trust in Shanghai, said the plunge meant real, inflation-adjusted interest rates in China were now back in positive territory even though the economy had run into fierce headwinds.
"The government will become more decisive in cutting rates," Nie said.
Jing Ulrich, head of China equities at J.P. Morgan agreed.
"We believe there is further scope for the central bank to ease monetary policy in an effort to avoid an excessive slowdown and stave off deflation," she said in a note to clients.
In further signs that price pressures are fading fast, annual non-food inflation -- considered a less volatile gauge of underlying conditions -- fell to 0.6 percent in the year to November from 1.6 percent in the 12 months to October.
And between October and November, consumer prices fell 0.8 percent, the National Bureau of Statistics reported.
The month-on-month figure is not adjusted for seasonal variations and so usually attracts less interest from economists. However, it has now either fallen or been flat for four months in a row.
"Definitely we are going to move into a deflationary environment in China, probably through the first six months of the year," said Glenn Maguire, chief Asia-Pacific economist for Societe Generale in Hong Kong.
DEMAND SHOCK
The drop in inflation is partly due to a collapse in global energy and commodity costs, which helped drive producer price inflation down to 2.0 percent in the year to November from 6.6 percent in the year to October, data released on Wednesday showed.
A surge in agricultural prices, particularly pork, that drove consumer inflation to a near 12-year peak of 8.7 percent in February is also unwinding.
But economists said the moderation also reflects a sudden deterioration in demand in China in recent weeks.
The government said on Wednesday that exports fell in November from year-earlier levels for the first time in seven years, while imports slumped 17.9 percent -- the steepest drop since at least 1993.
"Negative growth in exports and imports yesterday showed shrinking external as well as internal demand. Falling domestic demand has a big impact on prices," Nie at Huabao Trust said.
China's top leaders, who had already unveiled a 4 trillion yuan ($583 billion) stimulus package on Nov 9, pledged on Wednesday to cut taxes and ramp up public spending to boost domestic demand and so prop up growth.
The government has been unusually frank in acknowledging its worries that the economic downturn will cause unemployment to soar, jeopardising social stability.
The World Bank expects growth to slow to 7.5 percent next year, from 11.9 percent in 2007 and around 9 percent this year, but Goldman Sachs said on Thursday it now thinks the pace of expansion will drop to just 6 percent. (Additional reporting by Simon Rabinovitch and Eadie Chen; Writing by Alan Wheatley; Editing by Ken Wills)