Why not increase the interest rates?

Why not increase the interest rates?
Apr 9, 2008 23:05
guest4772	Inflation has become a great concern for Chinese authorities. As the news reports, CPI had increased by 8.5 percent in Feb.. According to some analysts, the CPI in March might also be above 8 percent. If the CPI of March is higher than Feb, some people estimate that the Chinese government will adopt some measures. But what measures will they take, to increase the rates? As the analysts estimate, the goverment might not increase the rates. Moreover, the government won't adjust the RMB exchange rates against other currencies. This means, China won't accelerate RMB appreciation despite of other requirements for appreciating RMB faster. In your opinion, will China increase the interest rates? If it doesn't increase the interest rates, what will they do?

Apr 9, 2008 23:05

guest4772

Inflation has become a great concern for Chinese authorities. As the news reports, CPI had increased by 8.5 percent in Feb.. According to some analysts, the CPI in March might also be above 8 percent. If the CPI of March is higher than Feb, some people estimate that the Chinese government will adopt some measures. But what measures will they take, to increase the rates? As the analysts estimate, the goverment might not increase the rates. Moreover, the government won't adjust the RMB exchange rates against other currencies. This means, China won't accelerate RMB appreciation despite of other requirements for appreciating RMB faster.

In your opinion, will China increase the interest rates? If it doesn't increase the interest rates, what will they do?

Apr 10, 2008 22:33

JIMMYB
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Join Date: Feb 7, 2007
Status: Offline

With the interest rates increasing, people would like to save their money at banks instead of consuming. In this way, the import will be reduced. But trade surplus will increase. I guess this will make EU and US very angry since they have complained this for very long. In recent months, US Fed has cut the interst rates several times. If China keeps to raise the interest rates, US trade deficit will be increasing. This is what US doesn't expect. Forced by this, China has little space to raise the interest rates.

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