SHANGHAI, Aug. 14 -- CHINA'S inflation in July expanded at the fastest pace in more than a decade, driven by rising food prices.

This will increase pressure on the central bank to increase interest rates, some economists said.

Consumer prices, the main gauge of inflation, jumped 5.6 percent from July last year - the strongest increase since February 1997, the National Bureau of Statistics said yesterday.

The faster-than-expected monthly lift beat the 4.4 percent increase in June and sent combined inflation up to 3.5 percent so far this year.

"This is all the result of pig and other meat shortages, compounded by extreme weather conditions in some parts of the country," said Stephen Green, a senior economist at Standard Chartered Bank (China) Ltd who had estimated consumer prices to increase 4.9 percent in July.

Food costs, accounting for a third of the CPI basket, stayed as the main driver of July's inflation growth after increasing costs of foodstock pushed up meat prices.

Prices of food surged 15.4 percent year on year after rising 11.3 percent a month earlier. Within the category, meat and poultry prices soared 45.2 percent, egg costs surged 30.6 percent and grain costs were up six percent.

"We see food-price inflation as a temporary issue and the chance of higher food-price inflation spreading into other categories is slim given the mild gains in non-food prices," said Zhang Yang, an analyst at Orient Securities Co.

Non-food inflation hardly registered - a 0.9-percent increase year on year, after a one percent rise in June and May.

The People's Bank of China has increased interest rate three times and ordered lenders to set aside larger reserves on six occasions this year in a bid to curb prices.

Yet experts are expecting more fiscal stringency to come this year to rein in inflation.

Rising consumer prices have also encouraged households to switch money to the booming stock market as higher inflation dampens returns on bank deposits.

The Shanghai Composite Index has jumped 80.16 percent this year to consistent record highs above the 4,800 mark.

"Inflationary pressures will remain high in the coming months and we expect more decisive tightening measures to be implemented in the near term," said Goldman Sachs economist Liang Hong.

However, this view was not echoed by Lu Zhongyuan, director of the Macroeconomic Research Institute of the Development Research Center of the State Council. Lu said the continued economic growth and a good harvest of summer crops should offset food-price increases and the CPI is expected to fall steadily later this year.