China To Raise Interest Rates

: China will likely raise interest rates again within the month, the New York Times reported on Wednesday, citing a forecast of economists and bankers with knowledge of the thinking of Chinese policymakers.

The Hong Kong-datelined story did not identify its sources, citing the sensitivity of the information.

It also cited the economists and bankers as saying China was unlikely to let the yuan currency appreciate faster anytime soon as a way to fight inflation.

Analysts polled by Reuters saw two more rate rises by the end of the first half.

The median forecast of economists polled by Reuters is for inflation to reach its fastest in more than two years at an annual pace of 5.3 percent for January.

(Reporting by Ben Blanchard; Editing by Alex Richardson)

Copyright 2010 Thomson Reuters. Click for Restrictions.

Comments

[Big Game Hunter]

08:37 PM on 02/03/2011

I wish this would have included some sort of projection of what impact this could have on the USA...

[ConcernedAboutRFuture]

07:15 AM on 02/03/2011

Let the tightening of the GRIP begin! Our mess gets worse.....and we did it to ourselves. Thanks GOP!

[halfpricefaustian]

02:51 PM on 02/02/2011

So they are fighting inflation. That means the prices of the goods they produce will go up. Since we import so much of our stuff from them, that will push up inflation here as well, so they will export their inflation to us as well as their products. Seems to me, anyway.

[Austro-libertarian]

10:11 AM on 02/02/2011

Austrian economists at the Mises Institute and folks like Peter Schiff have been saying this for almost a decade... Why won't Krugster debate him?

[ErnestineBass]

11:51 AM on 02/02/2011

Why should Krugman debate ANYONE who subscribes to a crackpot "economic theory" that's proven to be a DISASTER time and time again?

http://www.alternet.org/story/149659/stop_the_austerity_craze?page=entire

You're entitled to your own opinion, sir, but not your own "facts".

[blindhammer]

12:00 PM on 02/02/2011

Austrian economists have been saying that China is going to raise its interests rates for almost a decade ... .... ?

[ErnestineBass]

12:04 PM on 02/02/2011

Methinks their "kristal" ball is malfunctioning.

[Sundialsvc4]

10:04 AM on 02/02/2011

China will do two very obvious things in the immediate future:

(1) "Unpeg" its currency from the United States Dollar. China's government is entitled to "regulate the value thereof" as it sees fit, no matter how many millions of US Dollars are being "borrowed from nowhere" every minute of every day. As far as historical policies had been ... well ... "that was yesterday."

(2) Raise interest rates to sensible, profitable levels. You don't "earn money" by borrowing it for free. That injects currency into the supply, but doesn't add value. It only waters it down further. Companies must turn to sales and internal improvements, and must not be allowed to listen to Rumpelstiltskin's siren call.

[netzwerg]

10:47 AM on 02/02/2011

(1) I highly doubt it.
(2) China does not lend money to the US for free. China buys US treasury bills or T-bonds from the US, http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt .
Treasury notes (or T-Notes) mature in one to ten years. They have a coupon payment every six months, and are commonly issued with maturities dates between 1 to 10 years, with denominations of $1,000. In the basic transaction, one buys a "$1,000" T-Note for say, $950, collects interest over 10 years of say, 3% per year, which comes to $30 yearly, and at the end of the 10 years cashes it in for $1000. So, $950 over the course of 10 years becomes $1300.

[Sundialsvc4]

04:50 PM on 02/02/2011

And the money to pay back that interest will be ... (sic) "borrowed."

The supposedly privileged position of the United States is entirely based on the idea that, since many currencies are "pegged to the Dollar," the US (alone) is magically able to issue an unlimited amount of ... anybody else's currency, by virtue of issuing its own.

You can always wrap those notions in the veneer of "legitimate financial transactions," and it always comes straight back to "the unlimited ability to 'borrow.'" And, thence, to the magical position of the currency that you alone can issue.

Ireland can go bankrupt ... the US simply "sells a few more treasury bills." Or whatever. It has an unlimited ability to issue them, after all.

It looks wonderful from the point-of-view of exactly one country. It might be tolerated if that "exactly one country" was still a manufacturing juggernaut, worthy of having a path beaten to its door. But given the present circumstances, it makes no economic sense. And, mark my words, billions of human beings are not nearly so stupid, nor so infatuated with America, as we might prefer to think.

[mistykane]

09:38 AM on 02/02/2011

That's smart of China to be warding off inflation. The U.S is going to be facing serious problems within a year or two because of our loose economic policy. Interest rates at 0% and a weak dollar is leading us straight into high inflation.

[joe kim]

09:22 AM on 02/02/2011

they have to do something to combat the inflation. they are experiencing inflation rates of 10% a month for food costs alone.

[ErnestineBass]

12:00 PM on 02/02/2011

Global food prices continue to increase, and the ongoing uprisings in the ME are the result.

Google "Foreign governments stockpiling grain".

[Mark2100]

08:52 AM on 02/02/2011

LOL. China is the Bank of America of countries. This is only the beginning as the dragon uses our money to bankroll the most advanced military in history.