China's consumer price index (CPI), a main gauge of inflation, hit an 18-month high in April, a rise of 2.8 percent over a year earlier, adding to fears of the econo-my overheating and fueling speculation of a possible hike in interest rates.

According to a statement released by the National Bureau of Statistics (NBS) Tuesday, April consumer prices are 0.4 percentage points higher than March's 2.4 percent rise, with food prices, which account for about a third of the CPI's weighting, leading the rise with a 5.9 percent jump from a year earlier.

The figure represents the sixth consecutive month of positive growth for the indicator, following nine months of negative growth, and challenges the Chinese government's goal of keeping the CPI's rise below 3 percent for the whole year.

"CPI growth is structural and still mild compared with our economic recovery and inflation in other countries," said Cheng Laiyun, an NBS spokesman. "In the short term, we are facing relatively large upward pressure on prices, but a full-year target of 3 percent is still achievable."

Yao Jingyuan, NBS' chief economist, attributed the April CPI growth, which is within market expectations of between 2.6 percent and 3 percent, mainly to rising food prices, particularly of vegetables.

Average vegetable prices in April surged about 25 percent from a year ago, with the wholesale price of garlic skyrocketing more than tenfold from a year earlier to about 12.2 yuan per kilogram at the end of April.

"The government should be vigilant and take action now to prevent the price hikes from spreading to the overall stock of food and commodities," Yao said.

Forecasting the CPI trend for the next three months, Yao said the index level would continue to rise further year-on-year given the low base rate in 2009.

Liu Shijin, deputy head of the Development Research Center (DRC), a think tank under the auspices of the State Council, warned that China faces some difficulties in hitting the government's inflation target this year.

With excess liquidity driving up prices, a more feasible goal will be to hold consumer price inflation to an average of less than 5 percent, he said at a financial forum during the weekend.

The latest CPI figure also exceeds the two-year deposit interest rate in China of 2.79 percent, tipping real deposit rates into negative territory.

The inflation rise enhances expectations that higher interest rates will be on the policy menu in coming months, especially after the central bank has raised banks' reserve requirements three times this year and stepped up the drainage of cash via open market operations, analysts said.

The interest rates have stayed unchanged since December 2008.

Other data released Tuesday also added to the anticipation. The producer price index (PPI), another measure of inflation at the wholesale level, rose 6.8 percent from a year earlier, the NBS statement announced.

Housing prices across 70 large and medium-sized cities jumped by an average of 12.8 percent in April from a year earlier, higher than the 11.7 percent increase in March, the bureau said.

The People's Bank of China, the country's central bank, also released April's lending figures on the same day. New loans rose to 774 billion yuan ($113 billion), up from March's 510.7 billion yuan.

"China is at risk of overheating, with spot fires breaking out in various parts of the economy," Brian Jackson, a Hong-Kong based strategist at Royal Bank of Canada, told Bloomberg.

However, investors are wary of a possible interest rate hike. China's benchmark Shanghai Composite Index slumped 1.9 percent Tuesday to an almost one-year low, as investors are concerned a credit clampdown could slow the country's growth.

The AP commented that any moves to cool prices might slow stimulus-fueled economic growth that surged to 11.9 percent in the first quarter. That could hurt the global recovery if it weakens demand for foreign iron ore and other imports.

In fact, not all of Tuesday's indictors pointed up. Industrial production rose 17.8 percent in April from a year earlier, below economists' estimates and down from 18.1 percent in March. Urban fixed-asset investment climbed 26.1 percent in the first four months from the same period in 2009, slightly down from 26.4 percent in the first quarter.

Economists disagree on the macroeconomic trend and the government's policy when the global outlook is still uncertain amid the European debt crisis.

He Maochun, director of the Research Center for Economic Diplomacy Studies of Tsinghua University, told the Global Times that a top priority task this year for China and the world is economic recovery, so the emphasis should be put on preventing an economic downturn, instead of anti-inflation.

"It is acceptable as long as the full-year CPI growth is kept within 3.5 percent," He said "The target of 3 percent involves political consideration."

There is little possibility that the central bank will boost interest rates, what they will do is observe external markets for a while longer, he added.

Li Daokui, a central bank adviser, however, told Bloomberg that China should focus on preventing an excessive increase in asset prices and liquidity after Europe's almost $1 trillion loan package avoided another global slump.

"The double-dip risk in the world economy is likely to be reduced to a minimum," Li said. "China's growth rate is not a problem this year."