Another rate increase sought to fight inflation
The mainland should be more active in tackling inflation by increasing interest rates at a faster pace, a former central bank researcher said yesterday.
Jing Xuecheng, a former deputy director at the research bureau of the People's Bank of China, said borrowing costs should rise by a further 45 basis points to combat rising prices.
His remarks came as a National Bureau of Statistics survey showed the consumer confidence index had risen from July's 96.7 points to 97.3 last month despite inflation running at an 11-year high.
The index reflects consumers' attitudes towards current and future macroeconomic performance, their future earnings and plans for purchases of major durable goods.
The PBOC on September 15 raised interest rates for the fifth time since March. The benchmark one-year lending rate was increased by 27 basis points to 7.29 per cent and the one-year deposit rate by 27 basis points to 3.87 per cent.
Money supply was tightened after last month's consumer price index, a key measure of inflation, surged 6.5 per cent from a year earlier, hitting an 11-year high and keeping deposit rates well in negative territory.
The central bank governor, Zhou Xiaochuan, has said he hopes real interest rates could turn positive.
'With inflation already 6.5 per cent, a 27 basis point rise may not work effectively,' said Mr Jing at a financial forum in Beijing. 'The bank could try a 45 basis point increase.'
He said policymakers should not ignore the accumulating risk of inflation and the State Council should rein in rising food prices to ensure social stability. 'Some researchers have said China has no serious inflation,' he said. 'It's dangerous if we don't realise the seriousness of inflation.'
The central government set the 2007 inflation target at less than 3 per cent at the beginning of the year.
The National Development and Reform Commission yesterday said it had been trying to stabilise grain prices, a major factor behind higher food prices, by lowering the soyabean import tariff from 3 per cent to 1 per cent and selling national stocks of grain and oil kept in reserve. It has also halted corn-processing industrial projects.
Some academics disagree about inflation risks. Chinese Academy of Social Sciences economist Wang Guogang said there was little risk of broad-based inflation because the recent leap in consumer prices had been due to a spike in food costs.
Growing concern
Inflation on the mainland is running at an 11-year high
Year-on-year increase in the country's consumer price index last month: 6.5%
Percentage of increase in borrowing costs, as suggested by former central bank researcher Jing Xuecheng : 0.45%
