Kevin Yao and Aileen Wang
Beijing (Reuters) - China interest rates for the third time raised this year on Wednesday, to clarify that inflation remains tame top priority, even as growth step of its huge economy facilitates gently.
The increase in the credit and deposit rates 25 basis points underlined China's quiet confidence, which is resistant enough to endure to more restrictive monetary policy of the world's second largest economy and is not vulnerable to the hard landing, that some investors fear.
China beat analysts close to, or even at the end of a cycle of rate increases and which was the latest move a preventive strike, before an another big jump in inflation data next week depositors provide to low income increased.
"Today's rate increase suggests that China's June remains inflation higher than might be expected and the second quarter GDP, solid, with our expectations", said Ligang Liu, head of greater China economics at ANZ in Hong Kong.
"The PBOC will help the interest-rate hike to optimize, their monetary policy by alleviate negative real interest rate problem to an outflow of deposits from the banking system to prevent the deterioration."
The latest move raised China's benchmark 6.56 percent and its one-year deposit reference rate by 3.5 percent a year lending rate, said the Central Bank.
The increases take effect Thursday, the Central Bank said in a brief statement on its website.
Response to concerns that this latest monetary tightening an already sluggish world economy will choke sold after the announcement, risk-weighted assets, particularly those with direct links to China's growth as the Aussie dollar.
China watchers could not agree whether is it more rate rises in the second half of the year. The people's Bank of China (PBOC) has banks reserve requirements nine times in this rate rises triggered in his nine-month cycle of the tightening of monetary conditions.
"China's inflation is almost to the end of battle." "There are already indications that the pressures that come", said Frederic Neumann, an economist at HSBC in Hong Kong. "Today's rate increase therefore the last in the cycle may have been"
GROWTH AND INFLATION
Hopes that close to a pause in the tightening of the PBOC may be considered a positive for stocks and could keep the rise in the Yuan onshore swap rates. Such expectations have helped, the Shanghai composite index bounce from nine month lows hit in June.
The world's second-largest economy expanded by more than 10 percent last year but has cooled down in 2011. First quarter growth was 9.7 per cent and data next week are expected, to the tempo eased to display 9.4 percent in the second quarter.
Evidence is growing that China's large manufacturing sector to lose momentum at home by both stricter policies and weakening of demand from abroad.
A survey of purchasing managers showed expanded the factory sector at its weakest pace in 28 months in June, mainly due to a drop in new orders. Many analysts estimate that the pace is a business, the extension on average to about 9 percent and industrial growth of around 13 percent.
In addition, a double-digit increase in wages should be included in already strong domestic demand.
With U.S. interest rates close to zero, Beijing is to ensure that it could attract more hedge funds in China, if that is too far prices. That would aggravate inflation the problem of excess liquidity and more fuel.
Just as there are insert fight with a negative real rate of return on their cash in banks to appease.
China's inflation accelerated a 34-month high of 5.5 percent in may as higher food prices and red-hot real estate market price pressure kept alive.
A Reuters poll forecast data due on July 15 will show that inflation rose to 6.3 percent in June-its highest level since mid-2008. Many economists estimate that inflation will reach its peak June or July.
Beijing is particularly sensitive to rising prices, the may be stirring the currency Union and threaten its leadership.
Wang Jun, an economist at CCIEE, a Government think tank, said that Beijing is again rate raise inflation, more stubborn than expected forced feel.
"When inflation comes down, there is no need to raise rates." But when prices rebound, could it further price increases, "he said."
(Writing by Koh GUI Qing and Vidya Ranganathan;) (Editing by Ruth Pitchford and Neil Fullick)
Copyright 2011 Thomson Reuters.
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