China's central bank to raise one-year interests rate by 0.25% points

Photo taken on Nov. 18, 2010 shows a teller counting the Renminbi at a bank in Qionghai City, south China's Hainan Province. China's central bank will raise the one-year lending and deposit interests rate by 25 basis points from Dec. 26, 2010, according to a statement posted on the website of the People's Bank of China Saturday.

BEIJING, Dec. 25 (Xinhua) -- China's central bank will raise the one-year lending and deposit interest rate by 25 basis points beginning Dec. 26, according to a statement posted on the website of the People's Bank of China (PBOC), the central bank, on Saturday.
This is the second time the central bank has increased interest rates in 2010, which raised the one-year lending rate to 5.81 percent and one-year deposit rate to 2.75 percent.
The PBOC increased the benchmark lending and deposit rates by 25 basis points on Oct. 20, which was the first time in almost three years.
The rate hike came after the central bank vice governor, Hu Xiaolian, said Friday that China would bring its overall money supply to a normal level with a range of policy tools, as the government shifts monetary policy from "moderately loose" to "prudent" to rein in rising inflationary pressure and curb asset bubbles.
The country's consumer price index(CPI), a main gauge of inflation, accelerated to a 28-month high in November of 5.1 percent, while new loans reached 7.45 trillion yuan in the first 11 months of this year, compared to the government's full-year target of 7.5 trillion yuan.
Li Daokui, a member of the monetary policy committee with the PBOC, said the rate hike mainly aimed at managing inflationary expectations and reflected the policy shift, as tightening the money supply is the best way to curb inflation.
The rate increase came "at the right time", as the western countries are celebrating the Christmas holiday, so as to avoid overreaction from the global markets and possible "hot money" inflows, Li said.
Besides interest rate hikes, China had increased the bank reserve requirement ratio six times this year to 18.5 percent and 19 percent for some large commercial banks.
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