China Rates Rise Again

The People’s Bank of China has today announced it’s decision to raise interest rates for the fourth time this year, on the back of mounting inflationary pressures within the economy.

The central bank of the world’s fastest growing economy has decided to raise interest rates four times this year in an attempt to stop rising prices.

The move, designed to curb the rising tide of inflation, will see the national benchmark lending rate rise from 6.84% to 7.02%. At the same time, the main deposit rate will grow to 3.6%, from its previous level of 3.33%.

Inflation is becoming a growing problem within the Chinese economy, measured at 5.6% through the year in July at the highest level in over a decade.

After years of exceptional economic growth, rising inflation has pushed the Chinese monetary authorities into rolling out control measures like those seen today.

The move was widely anticipated by analysts, with experts predicting a spate of inflation control measures, expecting the Chinese authorities to take more steps this year to keep inflation at bay.

Markets were shocked, however, by the unusual timing of the decision, which fell between regular policy decision dates based on convention.

Much of the inflation in China has come as a result of rising food and furniture prices, with some meats becoming up to 45% more expesive over the last year alone.

On an international level, inflation strengthens currency, which can have a damaging impact on exports. And with the Chinese economy so heavily relient on exporting goods, inflation could have serious wide ranging effects on the health of the economy.

Analysts have predicted that whilst growth within the Chinese economy remains strong, today’s measures may not be the last towards inflation control, as price pressures continue to take their toll.

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