China raises interest rates for second time in 2011

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Editor's notes:

On April 5, the People's Bank of China (PBOC), China's central bank,?raised?the benchmark interest rate for the second time in 2011. The 25-basis-point rate hike is aimed to?further dry up liquidity and curb the surging inflation.

Latest news:

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China raises interest rates again to curb inflation

China's central bank raised interest rates Tuesday for the second time since Februay this year to dampen inflation and asset bubbles. One-year deposit and lending rates were raised by 25 basis points, taking the deposit rate to 3.25 percent and the lending rate to 6.31 percent.
Recent rate hikes:

Feb. 9, 2011 ?| ?Dec.?26, 2010??|??Oct.?20, 2010

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??China may raise interest rate in early April

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??Consumers set to see biggest price hikes

Experts' opinions:

"I expect the central bank to raise interest rates three times more this year. The benchmark 1-year deposit rate should?reach between 3.75 to 4.00 percent, according to my forecast. This round of rate hike is within market expectation because of high?international and domestic inflationary pressure,?surging oil prices as well as rising expection for higher grain prices."

-- Lu Zhengwei, chief economist at Industrial Bank

"The rate hike is in line with market expectation and is targeted at?reducing?upward pressure on March?consumer price index.?The demand deposit rate?was raised again, showing the central bank's intention to stablize deposits. The private financing rates are expected to climb even higher."

-- Ba Shusong, deputy director of Finance Research Institute of DRC

"The rate hike may indicate that the consumer price index could hit a new high of 5.2 percent in March. The central bank's move also shows that it plans to end the current situation of negative real interest rate. I think there may be a third rate hike in the first half of the year."

-- Zhu Jianfang, chief economist at CITIC Securities

"The interest rate increase indicates that China's central bank is still worried about current inflationary pressure. The consumer price index is highly likely to exceed 5 percent in March. It also shows that China is not very concerned that tighter monetary policy would result in slower economic growth."

-- Zhuang Jian, chief economist at Asian Development Bank

"Inflation is the primary problem in the Chinese economy. The central bank's rate hike helps to curb inflation and real estate bubbles. Previously the central bank tends to use quatitative?tools such as reserve requirement hikes?because it fears that price tools like rate hike may slow economic growth and increase hot money inflows."

-- Guo Tianyong,?professor at the?Central University of Finance and Economics

"Every time when the central bank raised interest rates before the release of the consumer price index, it means CPI growth had fallen out of expectation. This time is no exception."

-- Ren Zhiqiang, chairman of Hua Yuan Real Estate Group