China's inflation rate accelerated in May to a 34-month high, raising speculation that the government will continue its tightening policy stance despite signs of a slowdown in the world's second largest economy.

The consumer price index (CPI), the main gauge of inflation, rose 5.5 percent year-on-year in May, up from 5.3 percent in April and far above the government's annual target of 4 percent, the National Bureau of Statistics (NBS) said on Tuesday.

This was the highest rate since July of 2008, when the index climbed 6.3 percent year-on-year.

"The country is still facing significant inflationary pressure," which will persist for a while, and the government will continue to prioritize easing prices in its macro regulation, NBS spokesman Sheng Laiyun said.

The inflation was largely fueled by food prices, exacerbated by drought and flood in some farming production regions, Sheng said.

Food prices, which account for nearly a third of the basket of goods in the nation's CPI calculation, surged 11.7 percent in May from a year earlier. The pace of increase accelerated from April's 11.5-percent rise. Pork prices rose 40.4 percent in May from a year earlier.

Growth in non-food prices also accelerated, rising by 2.9 percent in May from a year earlier, Sheng said. April's non-food prices increased 2.7 percent year-on-year.

"The steadily rising non-food prices suggest inflation could be sticky and structurally elevated (due to rising labor costs of migrant workers) at about 4 percent in the next several years," Bank of America-Merrill Lynch economist Lu Ting said in an email to clients.

Lu expected CPI growth to be slightly above 6 percent in June, but said the risk of inflation getting out of control was quite small.

To ease soaring prices, China's central bank has raised interest rates twice this year and hiked the reserve requirement ratio for banks six times.

After the May data report, the central bank announced this year's sixth reserve requirement ratio increase, effective on June 20, which will bring the ratio up to 21.5 percent.

The monetary data of May, announced by the central bank Monday, showed new bank lending tumbled more than 25 percent from April while money supply grew at the slowest pace since 2008.

Analysts expect the tightening policy to continue for the rest of the year to help keep price rises in check.

"The monetary and credit policy has not been overly tight, and will not be tighter in the remainder of the year," UBS Securities economist Wang Tao said. "As CPI inflation has yet to peak, we continue to see two more interest hikes this year, all within the next three months."

Weighed down by a widespread power shortage and the government's tightening policies, industrial value-added output growth slowed to 13.3 percent year-on-year in May, the lowest level since last November.

Fixed asset investment for the January-May period rose 25.8 percent from a year earlier, up from the 25.4-percent rise in the first four months of the year.

Retail sales of consumer goods rose 16.9 percent year-on-year to 1.47 trillion yuan (226.77 billion U.S. dollars) in May.

The market has responded to the data positively with the key Shanghai index climbing 1.1 percent on Tuesday, after analysts said the data indicates the national economy is slowing but does not face a hard landing.

Concerns of a hard-landing have dragged the Shanghai Composite Index down more than 10 percent from this year's peak on April 18.

Although growth in some economic indicators has declined, Sheng said the country's economy is on track for "stable and relatively fast growth."

The latest data shows the economy is still going strong and does not support the hard landing fears, Wang said.

"The bearish sentiment on hard landing will persist for a couple of months, but we believe a hard landing is a low-probability event," Lu said, adding that the robust fixed asset investment figure will offer some comfort for those worrying about a "coming collapse" in China.