Chinese national bank raises interest rates
Almaty. February 9. Kazakhstan Today - China's central bank has raised its one-year lending rate and one-year depost rate, Kazakhstan Today reports.
China's central bank has raised interest rates for the third time in four months as authorities ramp up efforts to tackle inflation, BBC News reported.
The People's Bank of China said it would raise its one-year lending rate to 6.06% from 5.81% and its one-year deposit rate to 3.0% from 2.75%.
In October, the Bank raised rates for the first time in nearly three years as it sought to tame rising prices.
Inflation for 2010 as a whole was 3.3%, above the official target of 3%.
But it was even higher towards the end of the year, hitting a 28-month high of 5.1% in November, before easing to 4.6% in December.
And there are fears that it could pick up again in January as food prices continue to rise.
The government has now raised its CPI target to 4% for 2011.
The latest interest rate rise was widely expected. Chinese policymakers have tightened policy around the Chinese New Year holiday five times in the last six years, either by hiking the reserve ratio requirements of banks or by raising interest rates, The Telegraph reported.
This year, Chinese banks have again flooded the economy with liquidity, doling out 500 billion yuan (47 billion pound) in new loans in the first week of January alone.
Traditionally, Chinese banks lend heavily in the first quarter of the year, allowing them to collect interest on the loans for the rest of the year.
And since Chinese New Year is a peak season for many businesses, there are no shortage of applicants for loans to boost capacity in the run-up to the holiday.
However, economists said the money flowing through the Chinese economy is ramping up inflation, especially after snowstorms in January damaged crops and pushed up food prices.
Mr Yu Song, an economist at Goldman Sachs, said that as well as interest rate rises, the Chinese government could also slow the pace of investment spending by state-owned Chinese companies, and approve fewer projects. "We believe these measures will eventually bring inflation down beneath the 3pc level within the year," he added.
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National Bank of Kazakhstan maintains base rate at 14.75%
Annual inflation in February and March continued to decrease, albeit at a slower pace. Inflation expectations have slightly decreased but remain at a relatively high level. The external inflation background continues to be neutral with the ongoing trend of declining grain prices in global markets. Within the domestic economy, inflationary pressure persists due to robust internal demand and unanchored inflation expectations," reads the bank’s official statement.
In the current circumstances, there is still limited room for easing monetary policy. This space will begin to form with the stable reduction of the stable part of inflation," it said.
Monthly inflation slowed down in March to 0.7% after a spike in the previous month (1.1%), forming above the average historical values (0.6%). A similar dynamic is observed for the indicators of core and seasonally adjusted inflation - a significant reduction in March after a sharp acceleration in February," said the bank.
The external inflation background is neutral. The cost of food in global markets in March shows a slight increase, mainly due to rising prices for vegetable oils. Grain prices continue to decline against the background of the realization of the harvested crop in exporting countries and the uninterrupted operation of maritime trade routes," said the bank.
In the European Union, the trend towards slowing inflation continues against the backdrop of the European Central Bank's restrictive policy. Despite expectations of weaker economic growth indicators this year, the ECB remains committed to returning inflation to its target value and intends to maintain restrictive monetary and credit conditions for this purpose," said National Bank Governor Timur Suleimenov in an April 12 statement.
The Federal Reserve notes that inflation in the United States still remains high. In March, the annual inflation rate increased to 3.5%, accelerating for the second consecutive month. According to the Fed's rhetoric, the current monetary and credit conditions will continue going forward. In Russia - a key trading partner of Kazakhstan, inflation in March remained at 7.7%. According to the statement from the Russian regulator, achieving the inflation target involves a prolonged period of maintaining tight monetary and credit conditions," said Suleimenov.
Pro-inflationary risks are conditioned by the continuation of reforms in the area of regulated prices, the consequences of abnormal floods in Kazakhstan, and the uncertainty associated with the volumes of budget expenditures needed for their elimination," the bank said.
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