Credit Suisse, a world leading investment bank, has raised its forecast for China's inflation rate in May to 3.5 percent following recent rapid hikes in pork prices.

The price of pork rose 10.5 percent in May, compared with April's figure, in 36 Chinese cities, according to the National Development and Reform Commission.

"The People's Bank of China (PBoC) may raise the interest rates in mid June if the CPI in May exceeds 3.5 percent," Tao Dong, chief regional economist for non-Japan Asia at Credit Suisse, was quoted as saying.

Tao said the PBoC should continue to introduce tightening measures to reduce inflationary pressure as well as rein in soaring investment and property prices.

"To achieve the purpose ideally, the PBoC should this year raise the one-year loan interest rate on another three occasions, 27 basis points each time, to 7.38 percent and the deposit rate to 4.14 percent, he said.

The PBoC raised the loan interest rate by 18 basis points to 6.57 percent and the one-year deposit rate by 27 basis points to 3.06 percent on May 19.

However, Chen Jijun, an analyst at Citic Securities, said the interest rate rises would offer little help in curbing the inflation as it is mainly caused by tight supply of some commodities.

China's Consumer Price Index (CPI), which measures inflation, picked up 3.3 percent in March and 3 percent in April.

An average 8 percent price rise for meat and poultry would push the consumer price index (CPI) up 0.6 percent as they account for 7.5 percent of CPI in China, the weekly Economic Observer Newspaper reported in its latest edition.

Shenyin & Wanguo Securities raised its inflation forecast to 3.6 percent in May and 3.3 percent for the whole year, 0.3 percent higher than its prediction made at the beginning of the year.

The Industrial Securities estimates the inflation rate for May will be 3.5 percent and continue to rise in the following months.

Liang Hong, chief China economist of Goldman Sachs Asia, earlier predicted the rise in food prices would drive consumer inflation above 4 percent in the coming months.

Zhou Xiaochuan, governor of China's central bank, said last week that a decision on whether to raise interest rates would wait until after the May consumer price index figures are released on June 12.

He said the central bank was watching the price hikes in food, including pork and eggs, closely to see how they would affect inflation.

Source: Xinhua