Your Economy (No Politics)

[Gizmo]

Could fuel inflation in the U.S. by weakening the Chinese economy and reducing the flood of cheap goods.


http://www.marketwatch.com/news/story/china-hikes-rates-again-slow/story.aspx?guid=%7B162A655E%2DF01...

China raises interest rates third time in a year

Last Update: 11:35 AM ET Mar 17, 2007


CHICAGO (MarketWatch) -- China's central bank is raising interest rates for the third time in less than a year to tighten up credit and investment to keep the world's fourth-largest economy on an even keel, Reuters reported Saturday.
'In light of the data over the past few days, this isn't the slightest bit of a surprise.'
— Jim O'Neill, Goldman Sachs
As of Sunday, the People's Bank of China's one-year yuan lending and deposit rates would edge up 0.27 percentage point apiece, bringing the one-year deposit rate to 2.79 percent and the lending rate to 6.39 percent.
"The rate increase is conducive to the reasonable growth of credit and investment, to stabilizing prices, to the stable operation of the financial system, to balancing growth and improving the structure of the economy, and to promoting the healthy but rapid development of the economy," the central bank said in an online statement.
The latest increase follows a boost of lending rates on April 27 of 2006, along with a rise in both in August. Banks' required reserves have also been raised five times since June to soak up liquidity generated by a balance-of-payments surplus, Reuters noted.
Economists had expected the central bank to make a move after strong February data showed a surge in credit, expanded factory output factories and 50% jump in exports form the year-ago period.
Banks put 981.4 billion yuan ($127 billion) worth of paper on the street in the first two months of this year, the same as 30 percent of all yuan credit offered in 2006.
"In light of the data over the past few days, this isn't the slightest bit of a surprise," Jim O'Neill, chief global economist at Goldman Sachs, told Reuters.