Business
        

Money

China likely to announce interest rate hikes in Q3: BOC

Updated: 2011-07-04 09:45

(Xinhua)

Twitter Facebook Myspace Yahoo! Linkedin Mixx

BEIJING - China is likely to raise its benchmark interest rate one or two times during the third quarter of this year to contain inflationary pressures, the Beijing Times reported on Saturday.

Reserve requirement ratios for large financial institutions currently stand at a record high of 21.5 percent, which leaves little room for China to announce further reserve ratio hikes, the newspaper quoted a report issued by the Bank of China (BOC) as saying.

Related readings:
China likely to announce interest rate hikes in Q3: BOC Changes in Interest Rate
China likely to announce interest rate hikes in Q3: BOC Equities slip again on fears of interest rate hike
China likely to announce interest rate hikes in Q3: BOC It's vital to speed up interest rate liberalization
China likely to announce interest rate hikes in Q3: BOC Markets fall on interest rate, costs concerns

The country often uses ratio hikes as its first line of defense against inflation, assuming that the move will make it harder for banks to lend and thus cool the country's overheating economy, the report said.

The nation has already required banks to hold more of their deposits in reserve six times this year in order to remove excess liquidity, despite the fact that there is little evidence to show that the measures have helped to tame prices, the report said.

Cao Yuanzheng, the BOC's chief economist, said interest rate hikes are the country's preferred method of tackling inflation, which has remained stubbornly high since mid-2010.

China's consumer price index (CPI), a main gauge of inflation, rose to a 34-month high of 5.5 percent in May, well above the government's target ceiling of 4 percent. The CPI is expected to reach 6 percent in June.

The BOC report said the CPI will rise 5 percent year-on-year for the third quarter, down 0.5 percentage points from the second quarter.

Consumer prices have been driven up by several factors, including rising labor costs and a recent credit binge, Cao said, adding that the persistence of these factors means that inflationary pressures will not be "fundamentally eased" anytime soon.

Specials

90th anniversary of the CPC

The Party has been leading the country and people to prosperity.

My China story

Foreign readers are invited to share your China stories.

Green makeover

Cleanup of Xi'an wasteland pays off for ancient city

Pret-a-design
Mom’s the word
Big win