Central bank moves to tighten money supply as inflation surges
The People's Bank of China yesterday raised interest rates for the fifth time since March, further tightening money supply in response to figures this week showing rises in fixed asset investment, consumer prices and money supply.
The announcement followed central bank governor Zhou Xiaochuan's remarks earlier this week that he hoped real interest rates could turn positive. Earlier this month, deputy governor Wu Xiaoling also said Beijing had dropped its policy of deliberately keeping yuan interest rates low to deter capital inflows.
Effective today, the benchmark one-year lending rate will rise 27 basis points to 7.29 per cent, and the one-year deposit rate will be raised 27 basis points to 3.87 per cent.
The August consumer price index, a key measure of inflation, surged 6.5 per cent year on year, hitting an 11-year high and keeping deposit rates well in negative territory.
The rate increase aimed to 'tighten credit control, rationalise investment and stabilise expectation of inflation', the central bank said on its website.