Local lenders may put the brakes on the latest cycle of rising interest rates because of renewed indications of 'hot-money' speculation on a yuan revaluation, Hongkong Bank chairman David Eldon hinted yesterday. Mr Eldon was asked to comment on whether overseas investors would be attracted to Hong Kong by signs of rising expectations of a yuan revaluation. The Hongkong and Shanghai Banking Corporation boss noted there had been signs of increased movement of funds into city banks. 'There is a reason for liquidity flowing in,' he said. 'There is speculation in the market [on yuan revaluation]. 'There is nothing we can do about that, but it can alleviate the pressure and the need [to raise interest rates].' Several senior US officials, including President George W. Bush, have said over the past few days that Beijing is considering easing controls over the yuan exchange rate. Mr Eldon's comment followed several recent adjustments by local bankers in their projections for interest rates this year. On Tuesday, two prominent bankers predicted a relatively low increase for the year. David Li Kwok-po, chairman and chief executive of Bank of East Asia (BEA), and Stanley Wong Yuen-fai, director and deputy general manager of the Industrial and Commercial Bank of China (Asia), both said the prime lending rate would likely rise by 1 percentage point this year. Other bankers and economists have predicted increases of between 1 and 2.5 percentage points. Since March, most banks have raised their prime rates by 0.25 to 0.5 of a percentage point, as the one-month interbank lending rates rose to what some bankers called a 'more normal level'. Mr Eldon predicted that as the economic recovery in the United States had yet to move into full gear, the US Federal Reserve would be unlikely to make drastic interest rate increases this year. He refused to predict, however, whether Hong Kong lenders would adjust rates for the third time this year if the Federal Open Market Committee meeting next month resulted in another US rate rise. 'I think we always have to take into account the market condition at the time,' he said. He was speaking on the sidelines of the annual general meeting of HSBC subsidiary Hang Seng Bank.