The Bank of China, one of the country's four large state-owned commercial banks, is predicting that the central bank will raise interest rates in the latter half of the year amid growing concerns over an overheated economy.

A Bank of China report forecasts 11.3 percent economic growth in the first half, compared with the previous prediction of 11 percent by the central bank's research bureau.

June's inflation rate, as measured by the consumer price index, was likely to approximate four percent as the economy was showing "a more obvious tendency to overheat", said the report.

There would be one or two moderate rises in the second half and the first would probably come in July, with tax on interest accrued on savings likely to be cut or eliminated, said the report.

One-year deposits currently carry an interest rate of 3.06 percent in China, but with the 20-percent interest tax, the actual yield is much lower than the predicted inflation rate of 3.2 percent for the full year.

The central bank would raise the interest rate by 18 to 27 basis points, taking the rate to 3.24 to 3.33 percent, to make the real interest rate positive even if the tax on savings interest is scrapped, said the report.

(Xinhua News Agency July 11 2007)