China lifts deposit rates by quarter-point: Xinhua

Discussion in 'Economics' started by ASusilovic, Oct 19, 2010.

  1. Oct. 19 (Bloomberg) -- China raised its benchmark lending and deposit rates for the first time since 2007 after inflation accelerated to the fastest pace in 22 months.

    The one-year deposit rate will increase to 2.5 percent from 2.25 percent, effective tomorrow, the People’s Bank of China said on its website today. The lending rate will increase to 5.56 percent from 5.31 percent, it said.

    China’s inflation quickened to 3.5 percent in August, highlighting overheating risks that have prompted the government to curb credit and clamp down on the real-estate market this year. Higher interest rates may encourage inflows of speculative capital from abroad, complicating management of the fastest-growing major economy.

    “Policy makers need to better anchor inflation expectations by boosting real interest rates,” Liu Li-Gang, a Hong Kong-based economist at Australia and New Zealand Banking Group Ltd., said before today’s release.

    China last raised benchmark rates in December 2007, with central bank Deputy Governor Zhu Min saying on March 25 that rates are a “heavy-duty weapon” and alternative measures were working well.

    Today’s move came after two surveys showed manufacturing accelerated in September and input prices jumped, signaling stabilizing growth and inflation pressures.
  2. Dogfish


    All part the Bernanke-PBOC deal behind the scenes, subdued QE2 on its way, sell stocks, sell US treasuries, the handout they are pricing in may well not turn up
  3. It´s all about not losing "face" for China...
  4. Most likely a pre-emptive strike on Thursday's GDP and prices reports. China likely already knows those numbers are going to come in high, so rather than listen to the US politicians clamor for exchange rate flexibility, now they can say they've done something.