Another interest rate hike 'to fight inflation'

"Our current CPI forecast is 5.2 percent year-on-year for March," said Qing Wang, an economist with Morgan Stanley in Hong Kong, in a note to clients.

"It also suggests that the Chinese authorities are confident in the sustainability of the underlying growth momentum."

Since the beginning of last year, China has raised the bank reserve requirement, the minimum reserve banks must hold back rather than lend, nine times to soak up liquidity.

Premier Wen Jiabao said at last month's annual session of the National People's Congress that inflation is a concern for most Chinese people and that reining in prices was the government's "top priority" in 2011.

Wang Yi, an analyst from China Securities Co, said the central bank needed to react to inflationary pressures, especially as the Labor Day holiday in May could see the CPI rising.

But he believes that the global economic uncertainty will see Chinese policymakers adopt a cautious approach in announcing further tightening measures.

According to a report released by the National Development and Reform Commission, price rises in food and housing were major contributors to inflation in January and February.

In the first two months of this year food prices grew by 10.6 percent year-on-year, and housing prices recorded a year-on-year growth of 6.4 percent.

In order to curb surging prices, the government has recently introduced a number of measures, including subsidizing low-income groups, increasing the food supply and adopting temporary price controls in certain industries.

Most central banks in emerging markets have raised interest rates as the regions emerged strongly from the financial crisis.

But major central banks in the developed world are now showing signs of starting to catch up.

The European Central Bank is expected to raise interest rates on Thursday by 25 basis points to 1.25 percent after inflation rose above its target.