Central bank expected to bring in rise of 0.5 percentage points after the holiday
China's central bank is understood to have decided to raise interest rates after an emergency meeting was held yesterday to discuss measures to curb investment growth.
Commercial banking sources said the People's Bank of China (PBOC) would raise lending rates by 50 basis points - or 0.5 percentage points. The new rate would come into effect after the week-long May Day holiday, the bankers said. They added that PBOC officials had also informed them that they were considering a 0.25 percentage point rise in deposit rates.
PBOC spokesman Sun Zhuzhang declined to comment yesterday, saying 'any announcement will be posted on our website'.
Word of the rate rise, which would be China's first in nine years, comes on the heels of administrative measures implemented this week to temporarily stop new lending. China's current one-year lending rate is 5.31 per cent and its one-year deposit rate 1.98 per cent.
'The macro-economic measures are not having their intended effect,' one banker said. 'There's a need to strengthen controls.'
The official Shanghai Securities News yesterday quoted Li Yang, director of the Chinese Academy of Social Sciences' finance research institute, as saying that an interest rate adjustment was inevitable if measures introduced to cool the economy did not prove effective.
