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Inflation expectation presses for rate hike

By Hu Yang (chinadaily.com.cn)
Updated: 2010-12-10 15:24

The possibility of an interest rates hike by China's central bank is imminent as inflationary pressure prolongs and a "prudent" monetary policy is in place, the China Securities Journal reported Friday.

China's National Statistics Bureau will release November's economic statistics this Saturday; market estimates the consumer price index (CPI) increase may hit this year's highest point, exceeding the October high of 4.4 percent.

Though the country's efforts to combat surging prices have seen some results, the inflationary pressure for 2011 is still considerable. Hongyuan Securities estimated the 2011 CPI may be four percent, with the highest monthly point hitting five percent.

Industry insiders said the expectation of a prolonged inflation may trigger interest rate hikes and the required reserve ratio may also be increased to freeze liquidity.

Related readings:  Nov consumer confidence rebounds as govt fights inflation  China is 'doing right thing' to curb inflation: Jim Rogers  Interest-rate reforms to be continued: PBOC official  China's interest rate rise - one off or more to come?

Sheng Hongqing, an analyst at Everbright Bank, said the central bank may raise interest rates or the required reserve ratio before year's end. China raised the interest rates by 25 basis points in October -- the first time in nearly three years.

Beijing officially shifted its monetary policy stance from a moderately loose one to a prudent one on Dec 3 to tame rising inflation and head off asset bubbles.