China's central bank may raise the interest rate as early as late March to check inflation, which may surge by much as 8.7 percent in February, according to the Bank of China (BOC).

As the effect of the recent snowstorm havoc still weighing on the prices of vegetables and chickens, food prices in February may rise six to seven percent over January's, Wednesday's Beijing News quoted the BOC report as saying.

Meanwhile, housing prices, which account for 14 percent of China's consumer price index (CPI), the main gauge of inflation, will also keep rising for a period of time, said the report.

The report said interest rate rises, rather than faster yuan appreciation, would be a better way out for China to tackle inflation in the long run and rate rises would not invite inflow of overseas hot money, given China's strict control on its capital account.

China's CPI rose 4.8 percent last year and had an 11-year monthly high with a 7.1-percent rise in January.

The National Development and Reform Commission (NDRC), the country's top economic planner, has set a 4.8 percent of CPI rise as the macro-control target for 2008, from three percent for 2007, the 21st Century Business Herald reported on Wednesday.

Deputy director Zhou Wangjun of the NDRC Pricing Department admitted the target became even more formidable because of the snow havoc.

The US investment bank Goldman Sachs has lifted its forecast of China's inflation this year to 6.8 percent from 4.5 percent.

(China Daily February 28, 2008)