An advisor to the People’s Bank of China said that lowered expectations of inflation make interest rate hikes in the near future less urgent, Bloomberg reported. Li Daokui said that while the consumer price index rose 3.1% in May, expectations of further consumer price rises are diminishing. "The goal of raising interest rates is to manage inflation expectations. If inflation expectations are easing … there is no basis for a rate increase," he said. Real interest rates in China have fallen into negative territory; the benchmark one-year deposit rate is 2.25%. Li said China could accept negative real interest rates in the short term.
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