Another interest rate hike depends on CPI

By Shangguan Zhoudong (
Updated: 2007-06-06 09:59

China's central bank governor Zhou Xiaochuan said on June 5 that the central bank still needs to look at the overall consumer price index (CPI) for May to decide its next policy moves, according to China Central Television (CCTV).

Zhou's comments are in response to speculation by some media outlets that the central bank may raise lending and deposit rates due to increasing pork and egg prices.

"We paid attention the increasing price of pork," Zhou said yesterday, noting that food prices have a heavy impact on the CPI, the May figures of which are due to be announced early next week.

Statistics from the Ministry of Commerce showed wholesale pork prices in 36 major Chinese cities in early May climbed 43 percent from a year earlier. Egg prices rose 31.6 percent year on year.

Other statistics reflect the trend of rapid economic growth.

China's urban fixed asset investment grew 29.6 percent in the first four months of 2007, compared to the same period a year earlier, according to the National Development and Reform Commission (NDRC), China¡¯s top economic planner.

Property prices in China's 70 major cities rose 5.4 percent in April from the same month last year, slowing slightly from March's 5.9 percent rise, NDRC statistics show.

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Some major cities continued to post large gains in April, with residential property rising 12.8 percent in Shenzhen and 9.4 percent in Beijing. Residential property prices rose 12.6 percent in Shenzhen and 9.0 percent in Beijing in the first quarter.

The CPI rose 3.3 percent in March and 3 percent in April, reaching the 3 percent benchmark that had been set by the central bank.

The People's Bank of China last month raised the key one-year deposit rate by 0.27 percentage points to just above April's inflation rate of 3 percent.

The central bank has already raised interest rates twice this year and five times required commercial banks to set aside more money as reserves to cool inflation, fixed-asset investment and stock market speculation.

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