Central bank raises rates

The People’s Bank of China raised interest rates, igniting fears of a downward pressure on China’s growth story, the Wall Street Journal reported. The central bank raised deposit rates and lending rates by a quarter percentage point, raising one-year deposit rates to 2.5% and one-year lending rates to 5.56%. It was the first rate hike taken by the central bank since 2007. The move ignited a tumble in stock and commodity prices on investors’ concerns that China will initiate further rate hikes in a broader wave to tighten monetary expansion and to dampen rising inflation pressures. Inflation rose to 3.5% in August, marking the highest level in price growth in almost two years. "The move is reasonable, as inflation has been above the warning line of 2.25% for quite a long time," said Zhu Baoliang, an official at the State Information Center. The National Bureau of Statistics will release on Thursday economic data for the month of September.