China may announce interest rate hike soon: analysts

By Kim Young-gyo
HONG KONG, June 7 (Yonhap) -- The Chinese central bank may announce an interest rate hike soon as the country's inflation is estimated to have gathered further momentum last month, analysts said Tuesday.
Market watchers estimate China's consumer inflation has grown more than 5 percent for a third straight month in May on soaring food prices. The official figure of the May consumer price index (CPI) is due out next Tuesday.
"May's CPI growth rate could have surpassed this year's highest of 5.4 percent in March," said Sung Yeon-ju, a China analyst for Daishin Securities. "There are growing expectations in the market that China would raise the interest rate before its release of the CPI."
Concerns have mounted recently that the overheating Chinese economy is sparking the country's worst inflationary pressures. China's consumer prices rose 5.3 percent in April from a year earlier.
In its tightening moves, the central People's Bank of China last month raised the benchmark interest rate for the second time this year and the deposit reserve requirement ratio for its major banks for the fourth time this year.
Other analysts also said further interest hikes are imminent.
Lu Zhengwei, a senior economist at China's Industrial Bank, predicted the one-year benchmark interest rate for deposits may soon rise from the current 3.25 percent to between 3.75 and 4 percent.
He further expected that the government will raise the reserve requirement ratio for banks more frequently after raising the interest rates.
Li Daokui, an adviser to the central bank and professor at Tsinghua University, said it would be reasonable to raise China's interest rates by at least 0.75 percentage point this year.
The central bank raised its one-year deposit and lending interest rates by 0.25 percentage point to 3.25 percent and 6.31 percent, respectively, in April. In February, it hiked the interest rates by 0.25 percentage point.
"The CPI's annual increase of 5.3 percent in April was obviously exorbitant," Li said. "The central government should and probably will curb this continuously rising inflation by raising interest rates."
The Chinese government's yearly target of inflation growth is 4 percent this year.
ygkim@yna.co.kr