China to raise interest rates as prices rise

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Beijing, July 6: China’s central bank said it will raise the benchmark one-year borrowing and lending rates by 25 basis points Thursday, Xinhua reported.

This is the third time the People’s Bank of China (PBOC) is raising its interest rates this year. The previous one occurred April 5. It also hiked the reserve requirement ratio for banks six times this year.

The move raises the benchmark one-year deposit rate to 3.50 percent and one-year benchmark lending rate to 6.56 percent.

Inflation data for June will be released July 15 and many economists forecast it will hit a new high of above six percent.

Food prices have been increasing, some dramatically. Pork prices rose for the 10th consecutive week as of June 26 and the wholesale price of pork was up 68 percent from a year earlier, according to the commerce ministry.

China will continue to implement a prudent monetary policy as inflationary pressures still remained high, the central bank said on its website Monday.

The Consumer Price Index (CPI), a main gauge of inflation, rose by 5.5 percent in May from the previous year, setting a 34-month high and well above the government’s target ceiling of four percent for the year.

The interest-rate hike will help check high inflation, said Lu Zhengwei, chief economist for the Industrial Bank.

IANS