China Hikes Interest Rates to Fight Inflation

With consumer price inflation expanding at an annual rate of 5.5 percent the People’s Bank of China has responded by increasing interest rates for the third time since the beginning of the year. The one-year lending rate was lifted 25 basis points to 6.56 percent from 6.31 percent. The one-year deposit rate rose accordingly to 3.5 percent from 3.25 percent.

Many analysts feel that even though consumer prices appear to be rising at a slower rate than earlier this year, further measures could still be necessary to deal with food prices that have expanded at a much sharper rate than wages.

“I think this will not flag an end of the tightening measures and the central bank could raise interest rates once more for the remainder of the year,” said Qiao Yongyuan, an analyst at research firm CEBM in Shanghai, who thinks that June’s inflation rate will be more than 6%.

Source: BBC News

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