The People's Bank of China (PBOC), the central bank, announced on Wednesday that it will raise bank's benchmark one-year borrowing and lending rates by 25 basis points beginning Thursday.
This is the third time for the central bank to raise interest rates this year.
Meanwhile, the central bank has hiked the reserve requirement ratio for banks six times this year.
Inflation data for June will be released on July 15 and many economists forecast it will hit a new high above 6 percent.
The CPI rose by 5.5 percent in May from the previous year, setting a 34-month high and well above the government's yearly inflation ceiling of 4 percent.