ChinaÃ¢â‚¬â„¢s monetary tightening in 2011 may be mainly in the first half as officials tackle the fastest inflation in more than two years, JPMorgan Chase & Co. and Morgan Stanley said.
The PeopleÃ¢â‚¬â„¢s Bank of China increased key one-year lending and deposit rates by 25 basis points on Christmas Day in its second move since mid-October. The change took effect yesterday. ChinaÃ¢â‚¬â„¢s stocks rose today and yuan forwards climbed to the highest level in five weeks as the decision bolstered speculation inflation will be contained.
Premier Wen JiabaoÃ¢â‚¬â„¢s government aims to limit asset bubbles in the real-estate market and prevent rising prices from leading to social unrest after flooding the economy with cash from late 2008 to drive a recovery. Officials may keep raising interest rates and banksÃ¢â‚¬â„¢ reserve requirements, sell bills to soak up cash and allow more gains by the yuan against the dollar, according to JPMorgan.
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