Beijing hikes interest rates after strong data
Sunday, 22 July 2007
BEIJING, July 21 (AFP): China's central bank announced yesterday it will raise interest rates for the third time this year in an effort to cool-but not stop-an economy that is growing at its fastest pace in over a decade.
Benchmark lending and deposit rates will each rise by 0.27 percentage points from today, the People's Bank of China said in a statement on its website.
China's main bank lending rate was increased to 6.84 per cent while the deposit rate rose to 3.33 per cent.
"The interest rate adjustment is to effectively guide rational growth in credit and investment, and to effectively adjust and stabilise inflationary expectations, and maintain general price stability," the central bank said.
A quick rate hike had been widely predicted after the government said Thursday that the economy expanded by 11.9 per cent in the second quarter and 11.5 per cent for the first six months of the year.
Such a pace had not been seen since the mid-1990s and analysts said Friday they had expected the rate increase as the first of a range of moderate measures aimed at keeping the economy on an even keel.
"No surprises here," said Ben Simpfendorfer, an analyst at the Royal Bank of Scotland in Hong Kong.
Friday's regulatory adjustment was accompanied by a cut in withholding tax on interest from bank deposits to five per cent from 20 per cent, a move designed to curtail overabundant liquidity in the financial system.
The interest rate increase was also aimed at taming what appears to be resurgent inflation after the consumer price index, the main gauge of prices, jumped to 4.4 per cent in June from 3.4 per cent in May.
Benchmark lending and deposit rates will each rise by 0.27 percentage points from today, the People's Bank of China said in a statement on its website.
China's main bank lending rate was increased to 6.84 per cent while the deposit rate rose to 3.33 per cent.
"The interest rate adjustment is to effectively guide rational growth in credit and investment, and to effectively adjust and stabilise inflationary expectations, and maintain general price stability," the central bank said.
A quick rate hike had been widely predicted after the government said Thursday that the economy expanded by 11.9 per cent in the second quarter and 11.5 per cent for the first six months of the year.
Such a pace had not been seen since the mid-1990s and analysts said Friday they had expected the rate increase as the first of a range of moderate measures aimed at keeping the economy on an even keel.
"No surprises here," said Ben Simpfendorfer, an analyst at the Royal Bank of Scotland in Hong Kong.
Friday's regulatory adjustment was accompanied by a cut in withholding tax on interest from bank deposits to five per cent from 20 per cent, a move designed to curtail overabundant liquidity in the financial system.
The interest rate increase was also aimed at taming what appears to be resurgent inflation after the consumer price index, the main gauge of prices, jumped to 4.4 per cent in June from 3.4 per cent in May.