Chinese Premier Wen Jiabao has said one day after a surprise interest-rate hike by the People’s Bank of China that his government is confident that inflation is under control and people should also be confident.

Speaking on a radio call-in show for China National Radio, he told a listener that inflation expectations are worse than inflation itself. The premier urged the people to remain confident as the government agencies are trying to control the inflation as November consumer price index inflated at a 28-month-record-high rate of 5.1% from a year earlier.

Mr. Wen pointed out that to food and real-estate prices are major contribution to inflation and raised concerns on agricultural prices. “The fundamental way to stabilize prices is to achieve a balance of supply and demand, which requires continuous development of agriculture,” he has reportedly said.

According to Chinese news agency, Xinhua, Mr. Wen said that he has made a promise last year to keep a check on house prices and is working hard to deliver on it.

The People’s Bank of China increased the one-year lending and deposit rates by 25 basis points on Christmas with change taking affect on Sunday. The country’s benchmark lending rate rose to 5.81 percent. The deposit rate in China rose 2.75 percent as the inflation stood at 5.1 percent in November.

The rise in rate on Christmas day came a surprise to many but PBOC monetary-policy-committee member Li Daokui said that the choice of the day was not by accident as the

Holidays are the right time for the real rate.

Analysts expect PBOC to raise its interest rates atleast two times in the first six months of 2011 in order to keep a check on inflation.