The People's Bank of China, the central bank, on October 19 announced to raise the benchmark one-year lending and deposit rate by 0.25 percentage points.
The one-year deposit rate will be 2.5 percent, and the one-year lending rate will stand at 5.56 percent, effective on October 20.
This is the country's first interest rate hike since December 2007, and the surprise move is widely considered an effort to cushion growing inflationary pressures and dampen the real estate market.
The move is reasonable since the consumer price index has been hovering at a relatively high level, said Li Daokui, a member of the Monetary Policy Committee of the central bank and a professor at the Tsinghua University's School of Economics and Management.
In addition, the Chinese economy has steered a steady course of growth, leaving room for the policymakers to fight inflation, he said.
Zuo Xiaolei, chief economist at the Beijing-based China Galaxy Securities Co. Ltd., believed the monetary tightening will put a freeze on investments in the property sector.
"But such a modest interest rate hike is not enough to force down the property prices," she said. "Further interest rate increases are likely to be already on the way." |