China raises rate fourth time since October to tame prices

April 05, 2011, 7: 38 am EDT by Bloomberg News

(Updates with comment from the the Economist fourth paragraph)

April 5 (Bloomberg) - China raised the interest rate for the fourth time since the end of the global financial crisis to limit inflation and reduce the risk of bubbles in the major economy to the more rapid growth.The one-year lending rate benchmark will to 6.31% of 6,06%, tomorrow, effective, the Bank of China said on its Web site at the end of the national holiday. One-year deposit rate stands at 3.25% 3 p. 100.Le move is a surprise to some, after the Credit Switzerland Group AG, Morgan Stanley and Bank of America-Merrill Lynch said officials may pause in tightening. While the Japan disaster and with Europe's debt woes are clouding the global Outlook, the Government of Prime Minister Wen Jiabao is more focused on 5 percent jump about consumer prices last month, said analyst Shen Jianguang.It "very important" this rate of China raised until March inflation data have even been announced, said Shen, an economist based in Hong Kong to Mizuho Securities Asia Ltd., who worked previously for the Monetary Fund International and the Central Bank European. "It's a good preemptive blow."Crude oil extended its decline after the announcement. Oil for may delivery on the New York Mercantile Exchange fell as much as 97 cents, or 0.9%, to $107.50 US per barrel and is at $107.58 at 11: 05 a.m. of London .the ' inflation EstimateInflation accelerated to 5.2 per cent last monththe pace the fastest since July 2008, according to the median estimate in a Bloomberg News of nine economists survey. Consumer prices jumped 4.9% in February from the previous year, the target of the Government throughout the year of 4 per cent in mind.Today move contrasts with the Central Bank Deputy Governor Yi Gang said March 23 that interest rates were at a "comfortable" level and that he was "not too concerned" by inflation because the pace of the increase in prices will slow down in the second half of the year.Rising oil and fresh products and sustained economic growth can encourage the nations of Asia to keep boost borrowing costs even while the Japan is facing an economic contraction following a record earthquake last month.Viet Nam, Taiwan, India, South Korea and the Thailand raised rates of reference in March or April and Chinese officials have also drained cash in the economy by increasing the Bank requirements of the reserve.Stability ThreatWen has described inflation as a tiger that "once set free will be very difficult to injected in his cage" and also as a threat to social stability.Monetary tools, the Government has deployed grants, State of food supplies and the threat of price control. Unilever, manufacturer of second of consumer in the world, reported increases in prices provided at the request of the Government.The rate of deposition of a reference year is lagging behind the pace of consumer price gains, an incentive for households switch assets market economies.Index of left managers purchase April 1, he indicated that the economy is now launched even though the Government stimulates borrowing costs and cracks down on real estate speculation.

-Sophie Leung, Zheng Lifei. With the help of Chua Baizhen in Beijing. Editors: Nerys Avery, Paul Panckhurst

To communicate with the staff of Bloomberg News for this story: Lifei Zheng to Beijing at lzheng32@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst in Hong Kong to the ppanckhurst@bloomberg.net

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