A Christmas gift sent by central bank?

A Christmas gift sent by central bank?
Dec 21, 2007 00:29
ICEBERG Points: Join Date: Sep 10, 2007 Status: offline	Just after Chinese policy makers announced that Chinese monetary policy in 2008 will be shifted from 'prudent' to 'tightening', the central bank made a statement on its website: From today, the benchmark interest rate will be raised for the sixth time this year. To be more specific, the one-year deposit rate will be raised by 27 basis points to 4.14 percent and the lending rate by 18 basis points to 7.47 percent. The move aims at 'prevent the economy from overheating and the structural price rises from evolving into evident inflation.' However, the sight deposit rate will be lowered 0.09 percent to 0.72 percent. It is the first time that China has lowered its sight deposit rate since 2002. Why to lower the sight deposit rate? The purpose is to 'encourage more people deposit their money in the bank for a certain period rather than doing investment in stocks or property market'. It also can 'narrow the rate gap between credits and deposits and help China check excessive credit growth.' On the other hand, the interest rate rise can also offer more space for the appreciation of RMB to ease pressure on Chinese currency. Supplement: Some economists anticipate that more hikes in interest rates and bank reserve requirement ratio will be made if the move fails to ease the inflationary pressure in a certain period.

Dec 21, 2007 00:29

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Join Date: Sep 10, 2007
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Just after Chinese policy makers announced that Chinese monetary policy in 2008 will be shifted from 'prudent' to 'tightening', the central bank made a statement on its website: From today, the benchmark interest rate will be raised for the sixth time this year. To be more specific, the one-year deposit rate will be raised by 27 basis points to 4.14 percent and the lending rate by 18 basis points to 7.47 percent. The move aims at 'prevent the economy from overheating and the structural price rises from evolving into evident inflation.' However, the sight deposit rate will be lowered 0.09 percent to 0.72 percent. It is the first time that China has lowered its sight deposit rate since 2002.

Why to lower the sight deposit rate? The purpose is to 'encourage more people deposit their money in the bank for a certain period rather than doing investment in stocks or property market'. It also can 'narrow the rate gap between credits and deposits and help China check excessive credit growth.' On the other hand, the interest rate rise can also offer more space for the appreciation of RMB to ease pressure on Chinese currency.

Supplement: Some economists anticipate that more hikes in interest rates and bank reserve requirement ratio will be made if the move fails to ease the inflationary pressure in a certain period.

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