China's consumer price index (CPI), the main gauge of inflation, rose 2.4 percent year on year in March, the National Bureau of Statistics (NBS) said Thursday.

The CPI was down 0.7 percent from the previous month, and for the first quarter up 2.2 percent from the same period last year, NBS spokesman Li Xiaochao said.

The inflation rate was still below the government's upper limit of 3 percent inflation this year, but staying within the limit might be "difficult and challenging" to achieve, said Li.

The government had set a ceiling of 3 percent for rises in consumer prices in 2010, according to a government work report delivered by Premier Wen Jiabao last month at the annual parliamentary session.

"China's consumer prices are basically stable," Li said, adding that the goal was still within reach with "concerted efforts and solid work."

The producer price index (PPI), a major measure of inflation at the wholesale level, rose 5.9 percent in March from a year earlier and climbed 5.2 percent year on year in the first quarter, Li said.

Li attributed the rise in CPI to the relatively low comparison basis of the first quarter of 2009, which lifted first-quarter CPI growth by 1 percentage point, he said.

Bad weather was another important factor, Li said, as the freezing winter brought dramatic rises in food prices, which accounted for 1.64 percentage points, or 74.5 percent of first-quarter inflation.

Food prices, which accounted for about a third of the CPI, rose 5.1 percent in the first quarter from a year earlier.

Li also noted that other factors -- rising international commodity prices, domestic producer prices and industrial costs -- had also started to push up the CPI.

Zhu Baoliang, chief economist at the State Information Center, said the government might find it difficult to achieve the 3-percent limit, but it could easily hold the inflation rate within 4 percent this year.

Consumer prices were growing at a moderate level, but there was still possibility of further inflation, due to excessive money supply, as well as the skyrocketing property prices and the prolonged drought in south China, Zhu said.

But as the government gradually scale back its money supply, inflation pressure would eventually ease, he said.

China's new yuan-denominated loans in the first quarter rose to 2.6 trillion yuan, 1.98 trillion yuan less than the corresponding period last year, according to the People's Bank of China (PBOC), the central bank.

However, the broad money supply (M2), which covers cash in circulation and all deposits, rose 22.5 percent from a year earlier to 65 trillion yuan at the end of March, which was still relatively fast compared with the nation's economic growth, said Zhu.

The government set a target limit of 7.5 trillion yuan of new loans in 2010, and M2 would increase by about 17 percent.

Jing Ulrich, chairperson of China Equities and Commodities of JP Morgan Chase, agreed that inflation was expected to rise before peaking around mid-year.

She said Wednesday's price hike in fuel products had indicated policy makers' confidence in inflation control and "a measure of comfort with China's near-term inflation outlook."

She forecast that CPI growth would stand at 3.2 percent for 2010.

Considering the upward trend in consumer prices and the recovery in exports, China's central bank might begin to raise interest rates in the second quarter to keep inflation in check, she said, adding J.P. Morgan Chase expected the PBOC to raise interest rates three times in 2010.