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August 21, 2007
China raises interest rates again
Seems like just a month ago. Oh, right, it was just a month ago. Via China Daily:
China's central bank raised the benchmark interest rates on Tuesday for the fourth time this year in an effort to prevent the economy from overheating and curb accelerating inflation.
The one-year deposit rate will increase 27 basis points to 3.60 percent, while one-year lending rate will rise by 18 basis points to 7.02 percent, effective on Wednesday, the People's Bank of China said in a statement on its website.
And it won't be the last, either. Real interest rates are still negative.
The inflation rate is also higher than the deposit rate, indicating a loss of purchasing power if people put their money into banks.
The low interest rate policy has somewhat encouraged an exodus of bank savings to the country's skyrocketing stock market, which has soared more than 80 percent so far this year on top of a 130 percent rally in 2006.
Somewhat? Make no mistake. Policymakers are concerned about this, and rightly so.
Posted by William Polley at August 21, 2007 10:42 AM
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