Central bank expects to increase interest at 2nd quarter

As US Federal Reserve tended to keep low rate level, some economists say <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />China could impossibly follow America’s steps, for it will take its policies abide by China’s actual conditions. In view of incessant rising of PPI and CPI, the central bank will not increase the interest until the second quarter, and it will take precautious against the inflow of hot money affected by interest increase.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Experts Liu Yihui says many mainland economists have noted America’s low rate position, thus there exists no impact on china’s money policy if interests added. He indicates, on the contrary, it will come earlier to add interest in China under low rate condition of America. Because of zero-negative rate maintained in Europe and America, the world sees flooded liquidity as bulk goods prices going up thus causing arbitrage by dollars moving toward emerging markets. This fact results in the rising of interest rate in China.

Lian Ping, chief economist of Bank of Communications, says it is improper to change interest rate policy in current economic situation. In control of ongoing PPI and CPI, measures have been adopted for the adjustment of economy by means of bank bill issuance, raising deposit reserve rates and the like.

Liu Yihui otherwise indicates in tightened money situation, if CPI come to rise by 3.5 percent in June-July, the central bank would intend to add interest rate during months of April and May, coordinating to the coming inflation expectation.