People's Bank of China Raises Interest Rates

Police do a security sweep along the Great Wall of China prior to U.S. Defense Secretary Robert Gates visit to Mutianyu, a few hours north of Beijing January 12, 2011.  Gates is in China hoping to bolster uneasy military relations with Beijing, but he also voiced concern over Chinas latest high-tech weaponry.         UPI/Stephen Shaver

Peoples Bank of China raised interest rates today for the fourth time in six months.

The one-year benchmark bank deposit rate raised 3.25 percent and the one-year lending rate rose 6.31 percent.

The announcement was made on a national holiday when the financial market was close.

Analysts say the increase was expected and some believe another will follow in May.

Wang Qing, an economist at Morgan Stanley in Hong Kong, said in a statement that the move may be a reaction to signs of growing inflationary pressure on the Consumer Price Index in March.

Higher interest rates are intended to encourage depositors to hold their money in accounts and make it costly for individuals and corporations to borrow from the bank, reducing spending.

Beijing has been trying to moderate an economy that has been growing 10 percent a year for the last two.

For months, Beijing ordered Chinese banks to moderate lending and hold onto large reserves in order to slow economic growth. The government also took measures to ease consumer price inflation.

Many economists expect improvements later in the year and another year of growth of 9 percent or better with a modest level of 3 percent inflation.

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