China look­ing to raise in­ter­est rates to fight in­fla­tion

The Pak Banker - - Company& -

BEI­JING: China is likely to raise in­ter­est rates in the com­ing days in a demon­stra­tion of the govern­ment's re­solve to tame in­fla­tion, an of­fi­cial news­pa­per said on Tues­day.

In a ban­ner head­line across its front page, the China Se­cu­ri­ties Jour­nal said this week­end of­fered a "sen­si­tive win­dow" for a rate rise, which would be the coun­try's sec­ond af­ter a sur­prise in­crease in Oc­to­ber, the cen­tral bank's first rate hike since 2007.

An in­crease in rates would also put flesh on the bones of Bei­jing's an­nounce­ment late last week that it was switch­ing to a "pru­dent" mon­e­tary pol­icy from the "ap­pro­pri­ately loose" stance of the past two years.

The re­port weighed on Asian stock mar­kets in early trade, though the coun­try's main in­dex in Shang­hai later pared losses. Chi­nese as­set mar­kets have tum­bled in re­cent weeks as in­vestors have priced in more tight­en­ing.

The news­pa­per said the tim­ing was right for a rate rise with of­fi­cial monthly eco­nomic in­di­ca­tors, no­tably the con­sumer price in­dex (CPI), likely to show an in­crease in in­fla­tion­ary pres­sure when re­leased on Mon­day.

"With ref­er­ence to the cen­tral bank's record of rais­ing in­ter­est rates just ahead of the re­lease of CPI, this week­end will pro­vide a win­dow for a pos­si­ble pol­icy change," the news­pa­per said, with­out cit­ing any source.

China's CPI in Novem­ber may have ac­cel­er­ated to a 27month high of 4.7 per cent from a year ear­lier, ac­cord­ing to a Reuters poll, up from a 4.4-per­cent pace in Oc­to­ber.

"The gen­eral trend of China's mon­e­tary pol­icy is ap­pro­pri­ate tight­en­ing on the ba­sis of the pre­vi­ous ex­tremely loose stance," said Chen Ji­agui, a se­nior govern­ment econ­o­mist.

Traders in China's in­ter­bank mar­ket said big len­ders have al­ready pre­pared enough money for an­other 50 ba­sis point in­crease in banks' re­quired re­serves, which are al­ready at a record high for big banks. -PB News

KABUL: Afghanistan's Pres­i­dent Hamid Karzai shakes hands with Bri­tain's Prime Min­is­ter David Cameron in Kabul. -Reuters

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