China signaled Tuesday that its inflation figures, due out on April 15, might be higher than expected when it raised interest rates for the fourth time since October. Benchmark one-year deposit rates, effective April 6, will increase by 25 basis points to 3.25%; one-year lending rates will also increase by 25 basis points to 6.31%, the People's Bank of China said on its website.
Reuters reported that this is yet another indication of China's determination to combat inflation, following as it does six increases in the required reserve ratios of banks and the previous three interest rate increases.
Xu Biao, economist with China Merchants Bank in Shenzhen, was quoted in the report saying, "The March inflation figures must be very high. It is an aggressive move, and the central bank is acting more aggressively than the market had expected. The latest interest rate rise, although at only one quarter point, may hurt investor confidence and the real economy quite significantly. More importantly, it is not the end of China's monetary policy tightening."
