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China Raises Interest Rate by 25 Basis Points

By Jonathan Baker,2014-11-19 05:56
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China Raises Interest Rate by 25 Basis Points

    China Raises Interest Rate by 25 Basis

    Points

    ChinaRaisesInterestRate

    by25BasisPoints

    ThePeoplesBankofChina(PB0C),

    thecentraIbank,announcedTuesdayit wouldraisebenchmarkoneyearborrowing

    andlendingratesby25basispointsfrOm Wednesday.

    Theratehikescomeamidincreasing pressureontheChinesegovernmentto centreIlnflation.

    Afterthehikestheone-yeardeposit interestratewilIclimbto3percentwethe oneyearloaninterestratewillreach6.06 percent.

    ItisthefirstriseinChinasoneyear

    benchmarkinterestratesthisyearand signalsarenewedefforttocoolpricesand tightenliquidity

    Analystssaidthetimingoftherise immediateIvaftertheLunarNewYear holidaywouldsendastrongsignaltothe marketthatthePBOCwaspayingmore attentiontoinflation

    ThoughtheDecemberconsumerprice index(CPI)slidslightlyfrOmNovember,we

    arestillfacinggreatinflationpressureinthe firsthalfofthisyear,"saidZhangLiqing,

    presidentofSchooIofFinancewiththe

    CentralUniversityofFinanceandEconomics.

    "Thisisthefundamentalfactorbehind

    thecentrafbanksinterestratehikesths

    time."saidZhang.

    ChinasCPI,amaingaugeofinflation,

    rose4.6percentinDecemberyearonyear,

    slightlylowerthanNovembers51percent,

    a28monthhigh.

    Forthewholeoffastyear,theCPfwas

    up33percent,exceedingthegovernments

    targetof3percent.

    ThePBOChikedtheinterestrates

    twicein2010todealwithrisinginflation

    andsoarlngassetpnces.

    .-rk?…r

    ConsumerConfidenceWeakensdueto

    Inflation

    Risinginflationarypressurescausedadeclineinconfidence amongChineseconsumersinJanuary,traditionallyashopping seasoninpreparationfortheChineseLunarNewYear,according tothelatestconsumerindexissuedWednesday

    TheBankcardConsumerConfidencelndex(BCC1),whichwas compiledbyXinhuaNewsAgencyandChinaUnionPay,dropped to85.53inJanuarythisyear.down1.28pointsfrOmthesame periodlastyearanddown039pointsfrOmtheDecemberlevel TheJanuaryBCCIreportattributedthedeclineinconsumer confidencetocontinuedpriceincreases,particularlyamongbasic

    consumergoods,whichwasdrivenbyunbalancedsupplyand demand

    ThefreezingweatherinthesouthernChinaregionhadalso disruptedtheProductionandtransportationofbasicgoods, includingvegetablesandmeatsaidthereportMeanwh_le, demandforthegoodssharplyincreasedasChineserevelersstored foodaheadoftheSpringFestivalthatstartedonFebruary3. However,thereportnotedthat,despitethepricepressure, thegeneralconsumersentimentisnotdeeplyaffected.Adecline intheBCCIismerelyareflectionofpricechangesinsteadof shrinkingdemand

    Thereportaddedthatasgevernmentinflationcontrol measuresgraduallytakeeffect,thepricetrendwillplayaless lmportantroleinChIneseconsumarconfidenceinthefuture. Latestfiguresfr0mChinaUnionPaythenationalbankcard association,showedthatinter-bankbankcardtransactionsinthe countrYjumped31percentyearonyearto74.7billionyuan(1.35 billionUSdollars)frOmFebruary2to8

    ×inhuaNewsAgencyandChinaUnionPayiointlybegan compilingtheBCCIindexinApril2009basedonbankcardtransaction dataandanalysisofstructuralchangesinurbanconsumption

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