China expected to keep interest rates unchanged

Mainland officials are expected to keep interest rates on hold in the first half of the year, a central bank adviser said, easing concerns that Beijing may raise rates after inflation reached a 10-month high last month.

"The central government doesn't have imminent pressure to rein in macroeconomic and interest rate policies," Song Guoqing, an academic member of the People's Bank of China monetary policy committee, said at a conference in Hong Kong yesterday.

He said rates were unlikely to change in the first half, with an expected headline inflation rate of 3 per cent for the period.

Song, a professor at Peking University, said the relatively high inflation rate last month was distorted by seasonal factors and the consumer price index was expected to moderate to 2 per cent this month.

Capital Economics economist Mark Williams wrote recently: "Inflation is likely to drop back to near 2.5 per cent in March, but the underlying picture is that inflation is likely to pick up over coming months and that this will gradually restrict policymakers' room for manoeuvre."

Zhou Xiaochuan, who was reappointed PBOC governor by the National People's Congress, raised an alert last week about rising inflation.