China raised interest rates for the second time in slightly over two months, signaling the authorities' resolve to combat rising inflation.

Beijing's latest move also suggests the world's second-largest economy may be entering a relatively formal monetary tightening cycle and that policy-makers may have been convinced that the weapons used so far, such as credit rationing and artificial price controls, have failed to cool politically sensitive consumer price pressures.

The People's Bank of China said Saturday that effective Sunday, it will raise the one-year yuan lending rate by a quarter of a percentage point to 5.81% from 5.56%, and the one-year yuan deposit rate to 2.75% from 2.50%. The move comes after the central bank raised on Oct. 19 the benchmark lending and deposit rates also by one quarter of a percentage point each, the first rate increase in nearly three years.

Saturday's announcement shows that the PBOC will likely raise interest rates more often next year to curb overly ample liquidity and rising inflation, said Brian Jackson, an economist at the Royal Bank of Canada.

"We expected a rate hike by the end of the year, though Christmas Day is something of a surprise—a rate hike is not normally on the wish-list for Santa Claus, but in China's case this is a prudent move," said Mr. Jackson.

"We think it is increasingly clear that using quantitative measures--such as reserve ratios--to rein in liquidity and credit has not been enough, and that adjusting the price of credit—that is, interest rates—is needed to get price pressures under control, so today's move suggests Beijing is also coming around to this view," Mr. Jackson said. He expects rate increases next year to total three quarters of a percentage point.

The rate increase came one day after PBOC Deputy Gov. Hu Xiaolian said the central bank will use a combination of tools, including interest rates and differentiated reserve requirement ratios, to curb inflation and prevent asset price bubbles next year.

China has adopted various measures in the past few months in an effort to rein in inflation. The PBOC on Dec. 10 raised banks' reserve requirement ratio by half of a percentage point, requiring them to hold more deposit funds in reserve rather than lending them out, which marked its third increase in one month and the sixth such increase this year.

Beijing rolled out the tightening measures as inflation has become a growing threat to economic growth and social stability. The consumer price index rose 5.1% in November, the fastest increase in over two years. Some economists said they expect the CPI growth to further accelerate in December and January.

In December, the Politburo of the Communist Party, the highest decision-making body in China, also ratified a transition to a tighter monetary policy that has been in place for months, shifting its monetary policy stance to "prudent" from "moderately loose."