PBOC advisor: Interest rate hikes possible

(AFP)
Updated: 2006-11-20 14:48

China cannot rule out further interest rate hikes in the coming months, the 21st Century Business Herald have reported, citing a leading central bank advisor.

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The possibility of rate hikes cannot be ruled out given the need to maintain curbs on investment and credit growth, the central bank advisor Fan Gang was quoted as saying Sunday.

Fan, advisor to the People's Bank of China, added the pressure for rate hikes was not strong, with inflation at just over 1 percent compared with 4-5 percent in 2004 and 6 percent in early 2005, the paper said.

In August, the central bank announced its second interest rate hike in less than four months in an effort to slow the nation's economy, which continued to race ahead at a double-digit pace.

Following the 0.27 percentage point hike, the lending rate reached 6.12 percent and the deposit rate 2.52 percent.

China's gross domestic product growth slowed to 10 percent in the third quarter, from 11.3 percent in the second, after a slew of tightening measures introduced by the government to rein in investment growth and tighten controls on land use.

China's consumer price index rose 1.4 percent year-on-year in October this year, and 1.3 percent in the January-October period.

Fan said China should raise interest rates as soon as the economy shows signs of overheating.

The newspaper said that in the past, boycotts by big state-owned companies, securities firms and other groups had posed obstacles to interest rate adjustments.

Fan stressed the central government must employ administrative measures to control growth in investment at the local government level, the report said.


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