Zhou Xiaochuan, governor of China's central bank, the People's Bank of China, reaffirmed in Beijing yesterday that the main influence on China's interest rate adjustments is internal economic data. Whether to cut the interest rate further would not be determined by US interest rate movements.
Zhou said that Consumer Price Index (CPI) drop in November went beyond many people's expectations. He predicted that the CPI will drop further. He also said that China's decision whether or not to cut the interest rate is not necessarily related to the US interest cut. "We will make our decision based on our own data," Zhou added.
Zhou previously estimated that China would be under pressure to cut interest rates further until the middle of next year. But whether the interest rate will be cut will depend mainly on the speed of decline in the CPI.
Data showed that the November CPI rose 2.4 percent year-on-year, a record low since January 2007. In November China cut its interest rate by 108 base points, the biggest interest rate cut in 11 years. However the prospects of another cut are high. Since the US Fed slashed interest rates to record 0-0.25 percent, the prospect of another interest cut has become even higher.
Some analysts have even predicted that in the ten days before the New Year, the central bank might further trim the interest rate. It is also rumored that Central Bank might lower deposit interest rates.
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http://paper.cnstock.com/html/2008-12/19/content_66701661.htm
(China.org.cn December 19, 2008)
