Should People's Bank of China raise the interest rates again?

Should People's Bank of China raise the interest rates again?
Jun 12, 2007 04:35
JOHNNY512 Points: Join Date: Nov 29, 2004 Status: offline	Source:Xinhua News. The NBS(National Bureau of Statistics) reported that inflation in China rose by the highest monthly level in more than two years in May. The consumer price index (CPI) rose 3.4 percent in May over the same month of last year, higher than the government's warning level of three percent. Food prices hikes are the main drive of inflation. The People's Bank raised the one-year deposit rate by 0.27 of a percentage point to 3.06 percent and the loan interest rate by 0.18 of a percentage point to 6.57 percent on May 19 amid efforts to reduce inflationary pressures and rein in rapid growth in investment. To release the inflation pressures, central bank may raise the interest rates again. Since 2006, central bank has raised deposit reserve ratio 8 times and it has reached 11.5% at present. Now the central banks of other countries all start to increase interest rates.On June 7th, New Zealand raised its interest rates to 8%. The European central bank raised it to 4%. US also said that to combat inflation is the first task. To increase the interest rates is one way to combat inflation. But it also has some side-effects. The economy will develop slowly and the investment will also be decreased. If the policy makers can not handle it properly, great damages will have taken place in market development. How do you think of this policy? In your opinion, will China raise it interest rates again?

Jun 12, 2007 04:35

JOHNNY512
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Join Date: Nov 29, 2004
Status: offline

Source:Xinhua News.

The NBS(National Bureau of Statistics) reported that inflation in China rose by the highest monthly level in more than two years in May. The consumer price index (CPI) rose 3.4 percent in May over the same month of last year, higher than the government's warning level of three percent. Food prices hikes are the main drive of inflation.

The People's Bank raised the one-year deposit rate by 0.27 of a percentage point to 3.06 percent and the loan interest rate by 0.18 of a percentage point to 6.57 percent on May 19 amid efforts to reduce inflationary pressures and rein in rapid growth in investment.

To release the inflation pressures, central bank may raise the interest rates again. Since 2006, central bank has raised deposit reserve ratio 8 times and it has reached 11.5% at present.

Now the central banks of other countries all start to increase interest rates.On June 7th, New Zealand raised its interest rates to 8%. The European central bank raised it to 4%. US also said that to combat inflation is the first task.

To increase the interest rates is one way to combat inflation. But it also has some side-effects. The economy will develop slowly and the investment will also be decreased. If the policy makers can not handle it properly, great damages will have taken place in market development.

How do you think of this policy? In your opinion, will China raise it interest rates again?

Jun 12, 2007 22:15	#1
FRANKENSTEIN Points: Join Date: Nov 29, 2004 Status: Offline	Well, to increase the interest rates is not the only and effective way to combat inflation. China has raised the interest rates several times. But it has proved that raising the interest rates has not brought with excellent results as we expected. The government should find other ways to combat inflation.

Jun 15, 2007 21:15	#2
ELLEN77 Points: Join Date: Feb 7, 2007 Status: Offline	That's true, I think the price of the market should be regulated firmly. There are some merchants raise the price too steeply and make unproper profits themselves, while all the farmers and consumers are the poor lambs. This is really a unhealthy phenomenon.

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