Wednesday, July 6, 2011

China Raises Rates Again

From Bloomberg:

China raised benchmark interest rates for the third time this year after inflation accelerated to the fastest pace since July 2008.

The one-year deposit rate rises to 3.5 percent from 3.25 percent, effective tomorrow, the People’s Bank of China said on its website today. The one-year lending rate will increase to 6.56 percent from 6.31 percent.

Today’s move may fuel concern that monetary tightening will trigger a slowdown in the world’s second-biggest economy. A manufacturing index fell in June to the lowest level in 28 months on weaker growth in orders and output.

Inflation “is the Chinese authorities’ top policy priority for the near future,” Peng Wensheng, a Hong Kong-based economist with China International Capital Corp., said before the announcement.

I highlighted the increase in BRIC countries' interest rates yesterday. This is obviously more of the same. These economies are driving world growth. As they raise their rates, their economies will slow, hurting US growth.