Tuesday, April 12

China ups prices for the fourth time since October

-SHANGHAI / BEIJING - China's Central Bank increased interest rates on Tuesday for the fourth time since October, increase the suspicion that next week inflation increased data can show more than expected in March.

China's rise rate six official increase in Bank reserves added since October and underscores Beijing's determination, on inflation, below the stall heads of State and Government as their most important task of this year said, to keep the world's fastest growing major economy on course.

The increase is found the European Central Bank its prices will show is expected on Thursday for the first time since the global financial crisis, to increase as rising inflation at the top of the global agenda.

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"The March inflation figures very high need", said Xu Biao, economist with China Merchants Bank in Shenzhen.

"It is a more aggressive step, and is more aggressive than the market had expected the Central Bank." The latest interest rate can rise, although time only a quarter, the confidence of investors and the real economy very significant damage. "More importantly, it is not the end of China's monetary policy tightening."

Benchmark one-year deposit and lending rates by 25 basis points to 3.25% and 6.31% or abolished were the people's Bank of China in a statement on your website said.

The increases effective from 6 April, when financial markets in China reopen after holidays on Monday and Tuesday.

China is the consumer price index due to the report March to 15 April. Economists expect the data show that consumer price inflation rose to 5.1 per cent in March, matching seen high in the November 28-month.

Inflation was 4.9 percent in February, unchanged from January. Beijing seeks inflation to an average of 4 percent this year.

After the news of China rate rise fears that stricter policy of the country limit demand for raw materials is loosened, metals and crude oil prices. The Australian dollar, a proxy currency for raw materials, also fell.

"We expect a rate hike in April, so that it no great surprise," said Allan Mehren, chief analyst at the Danske Bank in Copenhagen.

"they are prices increase to curb inflationary pressures in the economy." We expect a further two hike of 25 basis points each this year. We already see a slowdown in the Chinese economy, but they need to raise rates a few times.

"Reserve requirement increases yet you are, but they must raise also rates." "I think that they are using various tools (for inflation)."

Inflationary pressures
Food prices were the main driver of China's inflation. Although monetary policy has little impact on food prices, because people have to eat, the increase reflects concerns that pressure on other parts will cause the economy to spread and so inflation expectations.

This underlines provide consumer goods giant to increase both prices for detergent and SOAP had planned, Procter & gamble and Unilever to 15 percent this month, local media reported on March 28.

Unilever agreed to comply with a request by the authorities to move the price increases, the Financial Times reported on Saturday.

Sharply rising commodity prices, including international crude oil prices, hovering around their highest level for more than two years are are a more inflation threat.

The economy, which grew more than 10 percent in the year 2010, is to meet vacuuming up raw materials around the world to the drive for growth.

Analysts have said they expect inflation in China to the Summit to the middle of the year.

"This increase suggests that the March CPI, which early next week is to be released can have surprising upward." "Our current CPI expected to 5.2 percent is y/y for March," said Qing Wang, an economist with Morgan Stanley in Hong Kong, in a note to clients.

"It suggests also that the Chinese authorities trust in the sustainability of the underlying growth momentum."

There are some indications that the raft of the tightening of monetary policy, which was accompanied with price controls to take effect is started. In fact, the Central Bank drains 300 billion yuan (46 billion dollars) in cash of financial markets in March by open market operations after injection of cash in January and February, tightening added.

A survey of the Central Bank was published in March, more households were satisfied with current price levels and saw less chance of rising inflation.

Purchasing Manager surveys last week also showed that price pressures were easing.

Global concerns
Most central banks in emerging markets in Asia and Latin America increased interest rates, as the regions heavily developed by the global financial crisis.

But major central banks in the developed world are signs begin to catch up.

The European Central Bank is likely to interest rates increase by 25 basis points on Thursday to 1, to 25 percent inflation over the target rose.

Comments by some Federal Reserve politician have market expectations raised, which is the US Central Bank to a stricter policy on the move.

So far, have complaints among Chinese about rising prices was more than to suspend on little but serious inflation is the cause of social unrest in China in the past.

"This ultimately good news because reduces the risk of error policy in China, which markets were too nervous," said Benoit Anne, head of emerging markets strategy at Societe General, of the climb rate.

"It reduces the risk of Chinese politics is also leader and shows them addressing the mounting inflation risks, that risk for emerging markets is a massive tail." "We see a few more walks like China needs more tightening of monetary policy."

The Central Bank raised Bank aside reserves or the amount of cash, the banks, by 50 basis points to 20 percent on 18 March.

The move freezes a means of payment, banks could give otherwise from and potentially fuel inflation. A major cause of inflation of the country has been the excess cash from giant China's trade surplus.

Copyright 2011 Thomson Reuters.

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