China raises benchmark interest rates

The People's Bank of China, the central bank, announced an increase of 0.27 percentage point in commercial banks' benchmark one-year deposit and lending rates on 20th July 2007 to keep inflation in check and preventing the world's fourth-largest economy from overheating

That will take the one-year benchmark deposit rate to 3.33 percent from 3.06 percent. The one-year lending rate will rise to 6.84 percent from 6.57 percent.

The increase came a day after the government reported that annual growth accelerated to 11.9 percent in the second quarter, the fastest rate in 12 years, from 11.1 percent in the first quarter.

The central bank has now raised interest rates five times since April 27, 2006. It has also raised banks' reserve requirements eight times since June 2006.

"This interest rate adjustment will help to guide reasonable growth of credit and investment, adjust and stabilize expectations about inflation and maintain basic stability of general price levels," stated the Chinese central bank.

The central bank also raised the interest rate on sight deposits to 0.81 percent from 0.72 percent, the first time it has adjusted that rate since February 2002.

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