Second interest rate hike during the year, inflationary pressure remains unabated

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April 6, 2011 First Financial Daily
This interest rate hike is the fourth interest rate hike since last year. Experts said that this round of interest rate hike cycle may have entered the second half

Just stepped into April, the interest rate hike boots suddenly fell.

Yesterday, the people's Bank of China announced that it would raise the benchmark interest rate for RMB deposits and loans of financial institutions from April 6, 2011. The benchmark one-year deposit and loan interest rates of financial institutions were raised by 0.25 percentage points respectively, and the benchmark deposit and loan interest rates of other grades and personal housing provident fund loan interest rates were adjusted accordingly.

This is the second time that the central bank has raised the benchmark interest rate since 2011. After this increase in the benchmark interest rate, the one-year lump-sum deposit and lump-sum time deposit interest rate rose to 3.25 percent, and the one-year loan interest rate reached 6.31 percent. The negative interest rate situation has improved.

According to market analysts, the interest rate hike may indicate that the upcoming March CPI data is high, inflationary pressures are still high, and inflation control is still the top priority this year.

Inflationary pressures as a trigger

In fact, as early as during the two sessions, the Governor of the Central Bank Zhou Xiaochuan emphasized that after the successful recovery of the national economy in response to the global economic crisis, inflation has also increased. In this case, interest rate policy will definitely be a need to use. Important tool.

Now, looking back, the interest rate hike is both reasonable and unexpected.

Data previously released by the Bureau of Statistics showed that consumer prices (CPI) rose 4.9 per cent in February from a year earlier, far exceeding market expectations. Keeping the overall price level basically stable is one of the important policy objectives that the central bank has already made clear this year.

"Domestic price pressure is still very high, and the CPI in January and February is actually very high; internationally, developed countries in Europe and the United States maintain loose monetary policies, and Japan has injected liquidity into the market after the earthquake." Zhao Xijun, deputy dean of the School of Finance and Finance of Renmin University of China, believes that the deposit rate is already at a relatively high level, and the interest rate is relatively low. The use of interest rates is larger than the deposit rate.

Political commissar Lu, chief economist of Industrial Bank (601166), also believes that greater inflationary pressure is a trigger for interest rate hikes. He expects CPI growth to reach 5.2 per cent year-on-year in March, up from February, and PPI growth to 7.2 per cent, unchanged from the previous month.

ANZ also expects China's monetary authorities to raise interest rates before the release of CPI data on April 15. They believe that the real negative interest rate problem facing China urgently needs to be solved by the central bank to raise interest rates as inflation continues to rise.

ANZ pointed out that in the medium and long term, due to the political turmoil in the Arab world and the support of reconstruction demand after the earthquake in Japan, commodity prices will still face relatively obvious upward pressure, and China will continue to face the pressure of imported inflation. China needs to use a series of policy tools to reduce inflation risks, including exchange rates and interest rates.

Under the background that the price level exceeds expectations and the price issue has received unprecedented attention, it is reasonable for the central bank to announce an interest rate hike. Li Xunlei, chief economist of Guotai Junan, even believes that this is a passive and lagging interest rate hike.

The so-called unexpected is relative to the unexpected increase in the central bill rate. On March 15, the one-year central bank bill interest rate unexpectedly rose to 3.1992, exceeding the benchmark one-year time deposit interest rate of 3% at that time for the first time. In this way, it is obvious to force the central bank to raise interest rates.

But in the next half month of March, the central bank did not use interest rate tools. During this period, Yi Gang, deputy governor of the central bank, also publicly stated that compared with global interest rates, China's current interest rate level is "very comfortable" and that too high will attract hot money.

"The interest rate hike has widened the level of domestic and foreign interest rate spreads, which has increased the pressure on arbitrage capital inflows." Zhao Xijun said: however, China is a country with foreign exchange control, the capital account has not yet been fully liberalized, and safe has the ability to control hot money.