Wednesday, July 6, 2011

People's Bank of China Raises Interest Rate 25bps to 6.56%

The People's Bank of China raised its one-year benchmark lending rate by 25 basis points to 6.56% from 6.31%, and the one-year deposit rate to 3.50% from 3.25%. The latest monetary policy tightening measures come after the Bank said on Monday that it would continue to implement a prudent monetary policy as inflationary pressures still remained high.  In a release on monetary policy the Bank noted the slow global economic recovery, and risk factors, as well as noting a continued commitment to rapid economic development, but with vigilance on inflationary pressures.

The People's Bank of China last increased the interest rate by 25 basis points in April this year.  The Bank also raised the reserve requirements by 50 basis points in June this year to 21.5%.  China reported inflation of 5.5% in May, up slightly from 5.3% in April, and 5.4% in March this year, and above the government's target of 4%.  Meanwhile forecasts for June inflation are for as much as 6.5%, however many analysts see inflation peaking in June/July.


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