China lifts rates to combat inflation

| July 6, 2011 | 0 Comments

The People’s Bank of China has today lifted interest rates – the third time this year – as it battles to tame inflation.

Inflationary pressures are rife in Asia and many central banks have opted to hike interest rates in an attempt to combat rising prices.

The bank said the one-year lending rate will rise to 6.56%, while the one-year deposit rate will increase to 3.5%.

Consumer prices rose 5.5% in May – the most in almost three years – fuelled by surging food costs.

Meanwhile, the measures adopted by China are also an attempt to cool the world’s fastest-growing economy.

There have been fears of overheating in the world’s second largest economy after growth of more than 10% last year.

However, growth is expected to ease to around 9.4% in the second quarter, compared with 9.7% in the first quarter.

A slowdown in growth is expected after the country’s booming manufacturing sector is losing momentum – as a result of tighter policy at home and weaker demand from overseas.

Meanwhile, the Government is taking action to curb house prices to avoid a property bubble in the housing market.

It has introduced a property tax, while it has made it more expensive to buy second homes, by lifting the minimum down payment.

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