Price pressures in the world's most populous country eased last month on the back of falling food prices, data on Thursday showed.

The government's consumer price index (CPI) rose an annual 2 percent, slower than April's 2.3 percent expansion and missing forecasts for a 2.3 percent increase, Reuters reported. Food prices, a major component of the index, rose 5.9 percent compared to the same period a year ago, lagging April's 7.4 percent expansion.

A Chinese vendor unloads onions at a local food market in Beijing. Getty Images

But the producer price index (PPI) remained stuck in negative territory for the 51st straight month, dipping 2.8 percent on-year, versus April's 3.4 percent fall and Reuters estimates for a 3.3 percent decline.

Mainland financial markets, alongside those in Hong Kong and Taiwan, were shut for the Dragon Boat Festival and will re-open on Monday. "The biggest driver behind the lower CPI reading was falling food prices. Pork inflation has peaked and fresh vegetable prices are coming off so looking forward, we expect CPI to hover between 1.5 to 2 percent over the remainder of the year," said Wei Li, China economist at Commonwealth Bank of Australia. He attributed the improved PPI performance to higher global commodity prices, specifically energy. "A 10 percent increase in oil prices would drive up producer goods inflation in China by roughly 6 percentage points so a large portion of the recovery in May's PPI was due to higher oil inflation that month."

What this means for the central bank