PBOC: Food prices will push inflation higher

Rising food prices may push inflation higher, prompting further interest rate hikes, the People's Bank of China (PBOC) said in its second-quarter monetary policy report. The consumer price index (CPI) was up 3.2% in the first six months from a year earlier and jumped 4.4% in June, its highest increase in nearly three years, the Wall Street Journal reported. The sharp rise was driven by an 11.3% increase in food prices, with pork prices rocketing 60%. The government's official target for inflation is 3% or below. "The current price rise is not caused by just chance or temporary factors. The direction of inflationary risk is up," the PBOC warned. The central bank sees little change of food prices falling in the short term, citing rapid urbanization and economic growth, as well as rising demand for grains used in bio-fuels as the key factors.