A key interest rate has been raised for the first time in five mothns. This may be the Central Bank’s move to put a brake on the speed of growth of the economy. Government investments, real estate construction and consumer spending are all rising briskly, thanks to a surge in lending by government-controlled banks and it is widely conceded this needs to be controlled.The surge is because even exports have begun to recover in the European Union and the United States, China’s two biggest overseas markets.
The People’s Bank of China (seen in our illustration) has announced the yield from its weekly sale of three-month central bank bills had inched up to 1.3684%. The yield had been stuck at 1.328% since Aug. 13.
An increase of less than 0.05% might sound small, but economists said it was a harbinger of more interest rate increases to come.
New York Times said this slight rate increase is not the first since the bottom of the economic downturn. After cutting interest rates on the same 3-month central bank bills by 2.4% in the last quarter of 2008 as the world’s financial system trembled, the People’s Bank nudged up interest rates by 0.363% from late June to early August last year in a series of increasingly large weekly increases.