Money

ABC expects one or two rate hikes in H2

(Xinhua)
Updated: 2011-07-04 09:29

BEIJING - It is necessary for China's central bank to raise the benchmark interest rate once or twice in the second half of this year to curb rising inflation, according to a report by the Agricultural Bank of China (ABC).

Related readings:  Shares drop on renewed fears of rate hike  Rising yield leads rate hike expectations in China  Equities slip again on fears of interest rate hike  Rate hike flags mounting inflationary pressure

In its six-month report on China's macro economy, ABC said an increase of 25 basis points in the interest rate each time would be appropriate due to linger inflationary pressure, with the coming interest rate hike very likely in early July.

Besides, it is possible for the central bank to elevate the bank reserve requirement ratio for one or two times in the second half, according to ABC.

The bank predicted a 4.8 percent year-on-year increase of the Consumer Price Index (CPI) for the full-year in 2011, while the gross domestic product (GDP) will expand by 9.5 percent.

Regarding the value of the Chinese currency renminbi, ABC expected the yuan to continue strengthening against the US dollar in the second half, with a rise of 5 percent this year.

China's CPI, a main gauge of inflation, spiked to a 34-month high of 5.5 percent in May and the central bank had so far hiked the benchmark interest rate twice this year by 25 basis points each time.