China hikes interest rates on inflation fears

China’s central bank has raised interest rates for the fourth time in five months as part of efforts to rein in bank lending and consumer price growth, the Financial Times reported. As of Wednesday, the benchmark one-year lending and deposit rates will rise by 25 basis points to 6.31% and 3.25% respectively. Analysts said that the rise, which came earlier than expected, suggests that the March inflation data, due for release next week, will be higher than most forecasts. The consumer price index (CPI) rose 4.9% year-on-year in February, the same as January. However, food prices and producer prices both accelerated, the latter growing at their fastest rate since October 2008. Inflationary pressure is generally put down to the massive growth in bank credit that accompanied China’s economic stimulus package. The reserve ratio requirement imposed on commercial banks has also been raised nine times since the start of last year in a bid to curb lending.