Interest Rate Hikes An Effective Economic Tool РYi Xianrong (易宪容)

From China Daily:

For the fourth time this year, the People’s Bank of China, the central bank, raised interests rates on Wednesday.

The interest rate on bank deposits was raised by 27 basis points, and the lending rate by 18 basis points. After the hikes, the benchmark one-year deposit rate is now 3.6 percent while one-year lending rate is 7.02 percent.

The central bank said it raised the interest rate to “control money supply and credit, and stabilize inflation expectation”.

Judging from the series of moves by the monetary authorities, it is not hard to detect the new preference of the decision-makers in choosing policy tools. The frequent adjustments of the interest rate this year indicate that the authorities are attaching more importance to it.[Full Text]

Yi Xianrong (ÊòìÂÆ™ÂÆπ) is a researcher with the Institute of Finance and Banking at the Chinese Academy of Social Sciences. Read also Highlights of China’s Monetary Policy in the Second Quarter of 2007 by People’s Bank of China.

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