Interest rates will likely be increased once or twice in the first half due to the high inflation, which was ranked as the top threat to China's economy, a Bank of China report forecast.
If prices remain high for a long period, people would expect further rises and hoard commodity products, further pushing up prices, it said.
Consumer prices jumped 7.1 percent in January from a year earlier, the biggest increase since December 1996. Premier Wen Jiabao said last Wednesday that the government must do more to rein in lending and curb inflation in the world's fastest-growing major economy, a sign the central bank may raise interest rates for the seventh time in a year.
The worst snowstorms in half a century in areas such as Zhejiang, Guangxi and Hunan from mid-January closed factories, paralyzed transport and disrupted food and power supplies.
The People's Bank of China has ordered commercial lenders to set aside more deposits as reserves on 11 occasions since the start of last year, pushing the ratio to a record 15 percent.
China is aiming to cap inflation at 4.8 percent in 2008, the same pace as last year.
(Shanghai Daily March 11, 2008)
