China's monetary tightening nearing an end: experts

By Kim Young-gyo HONG KONG, July 7 (Yonhap) -- China's monetary tightening moves appear to be coming to an end as inflationary pressure in the world's second-largest economy is expected to ease in the second half of this year, experts said Thursday. The People's Bank of China, the central bank, said late Wednesday it will boost its benchmark one-year deposit and lending rates by 0.25 percent to 3.5 percent and to 6.56 percent, respectively. It was the third rate hike this year, which many market analysts had expected to take place in June. "Following Wednesday's move, we maintain the (view) that the policy rate hike looks close to an end," said Jian Chang, an economist at Barclays Capital. Barclays forecast growth of China's consumer price index (CPI) will come down to around 5.8 percent in July from the expected above 6 percent in June, and below 5 percent in September. The investment bank, however, said that another rate hike may be conducted during the third quarter since the impact of high inflation on the economy is larger than that of a growth slowdown. Samsung Securities Co. said China will start loosening its monetary policy in the second half. "The latest interest hike signals a temporary suspension of the current tightening cycle, which started in October last year," said Lee Seung-hoon, an analyst at Samsung Securities. "The Chinese authorities practically have decided to allow some level of inflation." Chinese Premier Wen Jiabao said in his recent visit to Europe that while the overall price level could be controlled below 5 percent this year, there are some difficulties in achieving 4 percent inflation. Lee said the slowing manufacturing activities in China will also ease pressure on interest rates. China's manufacturing activity slowed for the third consecutive month in June to 50.9, which was the lowest in 10 months.