Inflation rate set to reach a two-year high

China's inflation rate is likely to hit a two-year high in February, increasing the chances of an interest rate hike, according to a Bloomberg survey of 21 economists. They predict a 2.8% year-on-year rise in consumer prices, following a January increase of 2.2%. Central bank Governor Zhou Xiaochuan is expected to respond by increasing interest rates so as to avoid breaching the 3% annual inflation target. An earlier survey found that economists thought a rise in the one-year benchmark lending rate from 6.12% was likely in the first six months of the year. The inflation is being driven by increasing food prices, which account for one third of the consumer price index. Wholesale grain prices saw a 9.2% year-on-year rise in January, the central bank has said.