Banking News
- More rate hikes possible: adviser
Date: 11-Dec-2007 Sources: (Shenzhen Daily)
CHINA still had some space for raising interest rates, a move that is unlikely to lure rapid fund inflows because domestic asset prices are already high, Yu Yongding, a former central bank adviser and a well-known economist, said over the weekend.
Yu wrote in an article in the 21st Century Business Herald that the central bank should adjust interest rates mainly based on the need to reduce domestic liquidity, rather than paying too much attention to the rate gap between China and the United States.
Yu, a former member of the People's Bank of China Monetary Policy Committee, also said the country's inflation needed to be kept under 4 percent, while an over 6 percent inflation rate was unacceptable and justified a tight monetary policy.
China's consumer inflation rate in October rebounded from September's level of 6.2 percent to match the 11-year high of 6.5 percent set in August.
The government has decided to shift to a tight monetary policy next year from a prudent stance, while maintaining its prudent fiscal policy.
Yu said allowing the yuan to appreciate faster could help curb inflation. But more importantly, doing so would boost a more balanced trade structure, leaving room for implementing a tighter policy.
He said China might face a deteriorating external environment next year, with U.S. economic growth expected to slow and the subprime problem likely to intensify.
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