MercoPress. South Atlantic News Agency

China hikes rates for the third time this year to combat inflation

Price of pork has soared over 50% in the last twelve months

China has increased its main interest rates for the third time this year to try to curb inflation. Chinese central bank, the People's Bank of China, said its one-year lending rate would rise to 6.56% from 6.31% and its one-year deposit rate to 3.5% from 3.25%.

The country's consumer price measure of inflation hit 5.5% in May, the highest rate for almost three years. The higher interest rates will take effect from Thursday.

Beijing has made tackling inflation its top priority. Food prices are of particular concern as they are rising much faster than general prices.

“Stabilising the general level of consumer prices remains the top priority of our macroeconomic regulation,” said Premier Wen Jiabao on Tuesday.

The price of pork has risen by more than 50% in the year to the end of May. This has been blamed on supply problems and the rising cost of feed. Speaking on a visit to a market over the weekend, Premier Wen promised that pork prices would begin to fall in the coming months.

“With the implementation of government measures, price rises will be curbed effectively,” he said.

Most economists had expected the central bank to increase rates this month and some think this may be the last move for some time. But all will depend on June inflation figures to be released next week.

A report from China's CCBIS bank released earlier suggested that inflation would peak at 6.2% in June.