CHINA'S inflation may be 4.5 percent this year and the economy is likely to expand more than 11 percent, the People's Bank of China said.

The forecasts are in a quarterly report on monetary policy, posted on the central bank's Website yesterday.

September's inflation rate of 6.2 percent was close to a decade high and more than double the central bank's three percent target for the year. Record trade surpluses have flooded the financial system with cash, fueling consumer prices and asset bubbles.

The report warned of still higher inflation and urges authorities to keep a close eye.

It forecasts the Chinese economy will enjoy a stable and fast growth in the coming months, side by side with increasing investment and accelerating consumption demand.

However, rising prices will slow the spending on consumption, the report said.

Wang Xinpei, a spokesman for the Ministry of Commerce, said China will take measures to ensure the supply of pork and edible oil, whose prices have risen over the past few weeks, according to the Xinhua news agency.

On November 5, the pork price, although down 7.5 percent from the record high in early August, was back up to 5.4 percent higher than the level in early October.

Meanwhile, the average retail price of peanut oil, soybean oil and rapeseed oil went up 1.1 percent, one percent and 0.7 percent respectively from early October.

China may increase interest rates for a sixth time this year to prevent the world's fourth-largest economy from overheating, according to a Bloomberg News survey of economists. Growth was 11.5 percent in the third quarter.

The central bank will strengthen liquidity management, using bond sales and banks' reserve requirements as tools. It will keep the yuan at a "stable, reasonable level" and increase the currency's flexibility, the central bank said.