Business News

China raises interest rates, as high inflation persists

Jul 6, 2011, 12:25 GMT

Beijing - China's central bank on Wednesday raised interest rates for the third time this year amid signs that government policies are failing to contain rising inflation.

The People's Bank of China raised its base lending and borrowing rates by 0.25 percentage points from Thursday.

The move was expected after the bank highlighted the risk of growing inflationary pressure amid forecasts on Tuesday that consumer-price inflation could have hit a three-year high of 6 per cent in June.

The central bank has also raised the required reserve ratio for commercial banks six times this year.

State media quoted analysts' forecasts of an annualized rise of up to 6.2 per cent in the monthly consumer price index for June, with the government scheduled to release the official figure on July 15.

Food prices were the major contributor to consumer inflation in May, which hit 5.5 per cent year-on-year.

The official China Daily newspaper cited Ministry of Commerce statistics as saying that pork prices rose for 10 consecutive weeks to the end of June.

Housing and electricity prices also rising quickly, the newspaper quoted Pan Xiangdong, chief economist at China Galaxy Securities, as saying.

The government said it aimed to limit annual inflation to 4 per cent this year but consumer prices have seen a year-on-year rise of more than 5 per cent for each of the past four months.