CPI to rise record 4.5% in 3rd quarter, rate hike likely

Updated: 2007-07-30 12:45

Thirteen institutions predicated yesterday that China's consumer price index (CPI) in the third quarter would rise a record high of 4.5 percent and the central bank would increase the interest rate again in the quarter, the Beijing Morning Post reported today.

The 13 research bodies include Peking University's China Center for Economic Research, Citigroup and the State Information Center.

At an economic forum yesterday, Song Guoqing, an economist with the Peking University's research center, expressed his opinion that the economy is overheated.

Song's judgment is different from the official opinion that "China's economy is operating properly." He said that the official judgment was due to moderate levels of fixed asset investment, but if other factors such as the trade surplus were taken into account, the growth of investment would be higher.

Another interest rate hike is necessary to curb the overheated economy and restrain inflation, scholars and experts said at the forum.

The 13 institutions also estimated that the nation's gross domestic product (GDP) will see an increase of 11.8 percent year on year in the third quarter this year.

But Song disagreed and said the GDP would grow 12.6 percent in the third quarter.

Statistics show that China's CPI rose 4.4 percent in June compared with a year ago, a 28-month high, while the GDP expanded 11.5 percent in the first half of this year.

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