Standard Chartered's Stephen Green said he expects the central bank to combat the "serious short-term inflationary threat" by hiking interest rates four times in the second and third quarters.

"We think that the central bank will have to move on rates before too long, despite US rates, and the slowing growth influence of the US, which will kick in later this year," the Shanghai-based economist said.

China raised interest rates six times last year.

The central bank will also continue to hike the reserve requirement ratio, with the next increase imminent, Green said.

Goldman Sachs concurred that a reserve requirement hike is likely to happen soon.

"We believe it is far too early to expect any policy loosening in China. To the contrary, policymakers in China will likely try to tighten monetary policy further, with more reserve requirement ratio hikes, faster yuan appreciation, and more heavy-handed controls over bank lending," it said.

Lehman Brothers economist Sun Mingchun also said faster currency appreciation and reserve requirement ratio hikes will be key tools used by the financial regulator this year. But he said the central bank will refrain from hiking interest rates, as they would not resolve the current inflation problem.

"Rate hikes do not help to solve the current inflation problem given it is caused by supply shocks rather than demand-driven," Sun said.

"Rather than using interest rate hikes, we expect window guidance, hikes in the reserve requirement ratio, and faster yuan appreciation to be the main tools used by the central bank in 2008 to rein in the trade surplus, excess liquidity and rapid loan growth,"" he said.

Sun also said CPI inflation is likely to peak at 7.5 percent in February and then ease to 6.0 percent in the second quarter, 3.4 percent in the third quarter and 1.1 percent in the fourth quarter.