China announced today that its benchmark interest rate was raised for the third time this year, as one of the world’s largest economies is reigning in inflation even as its vast economy is slowing down.
Beijing is confident enough that the Chinese economy can accommodate take tighter monetary policy and an additional 25-basis-point increase in lending and deposit rates.
“China’s inflation battle is almost at an end. Already, there are signs that price pressures are coming off. Today’s rate hike may therefore have been the last in the cycle,” said Frederic Neumann, an economist at HSBC in Hong Kong.
The Bank of China said “ The latest move increases China’s benchmark one-year lending rate to 6.56 percent, and lifts its benchmark one-year deposit rate to 3.5 percent”
The increases will take effect from Thursday, the central bank said in a short statement on its website.
Inflation in China accelerated to the quickest pace since 2008. JPMorgan Chase & Co., HSBC Holdings Plc and Bank of America Merrill Lynch said the increase may be the last this year as analysts forecast that inflation will moderate after probably exceeding 6 percent last month.
Higher yielding currencies like the Canadian Dollar and the Aussie Dollar, and major commodities like oil and copper fell over concerns that a slowdown in China will add to headwinds for the global economy.