TARGETED EASING UNAFFECTED

Despite rising consumer price inflation and declining producer price deflation, experts said the policy of "targeted" easing would stay.

These readings could ease concerns about deflation, while the rise of CPI inflation could make some people concerned about the prospect of incoming easing measures, said Lu Ting, chief China economist with Bank of America Merrill Lynch.

"We believe that the threat of deflation in China is quite small, and the rise of CPI inflation to 2.5 pct, which is still far below the 3.5 percent government target, won't impact the scale and pace of the ongoing mini-stimulus," Lu added in a research note.

To steady growth near its target of 7.5 percent without disrupting plans to restructure the economy, the central government has unveiled a string of targeted measures, including cutting reserve requirement ratios (RRR) for rural banks, speeding up railway and public housing construction, and tax breaks for small businesses.

China's central bank announced on Monday that it will cut the RRR by 0.5 percentage points for banks engaged in proportionate lending to agricultural and small firms, taking effect June 16.

Lu expects CPI inflation to stay at a moderate level during the rest of the year, as the price increase acceleration, which is partially a result of a one-off base effect, is not sustainable.

"We expect CPI inflation to stay around 2.5 percent in the next several months while PPI inflation will pick up," Lu said.

Kuang said the CPI might go up further in the next few months as market-oriented reforms will gradually correct "price distortions."

However, the possibility for the CPI to rise above the 3.5-percent target for 2014 is very small, Kuang added.