China (the PBoC) raised interest rates

China (the PBoC) raised interest rates for the 3rd time this year, effective tomorrow – the 1 year lending rate was raised by 25 bps to 6.56% from 6.31% and the 1 year deposit rate also by 25 bps from 3.25% to 3.50%, as rumoured – deliberately leaked?. I understand that the PBoC has to clear its decisions with the 9 man State Council (the
committee that controls China), by the way. Clearly further monetary
tightening is warranted to curb rising inflation. However, I still
believe that the number of prospective interest rate rises predicted
by the market are unlikely – possibly 1 one, but unlikely to be more.
Chinese inflation should start to decline in the 2nd half of 2011
(even as early as this month or next), though price controls distort
the picture.

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