China\'s consumer prices rose at the fastest pace in more than two years, the government said Thursday, following warnings that inflation would likely exceed Beijing\'s three percent target for 2010.

People shop in a popular market in Beijing on November 3, 2010. China said Thursday that retail sales, the main gauge of consumer spending in the world\'s second-largest economy, rose 18.6 percent in October compared with the same month a year ago.

The nation\'s consumer price index -- or CPI, a key measure of inflation -- rose 4.4 percent on year in October, compared with 3.6 percent in September, the National Bureau of Statistics said.

It was the fastest pace since September 2008 -- the start of the global financial crisis when consumer prices rose 4.6 percent.

The figure, which was higher than several analyst predictions, comes as Beijing battles to rein in consumer prices and soaring housing costs.

The CPI for the first 10 months of the year was up three percent, mainly driven higher by rising food prices and living costs, NBS spokesman Sheng Laiyun told a news conference.

"Price pressures are increasing. That means pressure on macroeconomic controls is increasing," Sheng said.

The October CPI reading marked a "very sharp increase" and persistent pressures on prices meant any dip in the coming months would be shallow and short-lived, said Brian Jackson, a senior strategist at Royal Bank of Canada.

"It\'s obviously eye-catching ... there are some reasons to think it might pull back in the next couple of months but I wouldn\'t want to bet the house on that," Jackson told AFP.

"More rate hikes are clearly on the way, and today\'s data also reinforces the case for faster currency appreciation," he added in a note.

The People\'s Bank of China last month raised its benchmark one-year lending and deposit rates by 25 basis points each -- the first interest rate hike in nearly three years.

Late Wednesday, the central bank tightened liquidity by ordering banks to set aside more reserves for a fourth time this year.

New lending in October fell slightly from the previous month to 587.7 billion yuan (88.6 billion dollars), the central bank said Thursday.

China\'s battle to keep prices in check comes amid worries that the US Federal Reserve\'s move to inject 600 billion dollars into the American economy could increase speculative "hot" money flows into China and fuel inflation.

"The new round of foreign quantitative easing policy will release enormous liquidity, which will have a rather significant impact on the Chinese economy," Sheng told reporters.

The Fed measures were expected to fan further inflation in China, he said, adding: "We will have to make greater efforts in order to reach the full-year inflation target."

The head of China\'s top economic planning agency, National Development and Reform Commission chief Zhang Ping, warned earlier this week that the full-year CPI would exceed the government\'s three percent target.

Other key data released by the statistics bureau showed the world\'s second-largest economy displayed signs of slowing last month.

Industrial output from China\'s factories rose 13.1 percent on year, but slower than September\'s 13.9 percent rise, as Beijing closed highly polluting operators and rationed power to energy-intensive industries.

Fixed asset investment in urban areas, a measure of government spending on infrastructure, rose 24.4 percent over the January-October period, slightly slower than the 24.8 percent in the first nine months of the year.

Retail sales, a key measure of consumer spending, rose 18.6 percent on-year.