Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Stock Market Dow Long-term Trend Analysis - 16th Oct 19
This Is Not a Money Printing Press - 16th Oct 19
Online Casino Operator LeoVegas is Optimistic about the Future - 16th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - Video - 16th Oct 19
$100 Silver Has Come And Gone - 16th Oct 19
Stock Market Roll Over Risk to New highs in S&P 500 - 16th Oct 19
10 Best Trading Schools and Courses for Students - 16th Oct 19
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

China Interest Rate Hike, Once Is Never Enough

Interest-Rates / China Economy Oct 20, 2010 - 03:09 AM GMT

By: James_Pressler


In a move that caught international markets flatfooted, this morning the People's Bank of China (PBoC) tightened two key interest rates by 25 basis points, its first rate hike since December 2007. Few analysts expected a rate hike any time before Q1 2011, so such a sudden hike - that lacked any accompanying discussion or explanation - triggered a wave of uncertainty as everyone scrambled to explain the move. So, along with the mob, we offer our own interpretation of today's events. 

First, we recognize this rate hike is long overdue, but like many others we did not believe the PBoC wanted to implement it just yet. (We are also surprised that the central bank opted for a very western 25 basis point hike as opposed to its usual 27- or 18-bp moves, but that is a discussion for another time.) Throughout the year the government has tried to keep lending under control through broader controls - raising bank reserve ratios, tightening lending conditions and requirements for real estate purchases, etc. - to marginal effect. The central bank wanted to contain the growing domestic real estate bubble, but not cool down other sectors of the economy through higher lending rates. Today's rate hike suggests the government is giving up this strategy, perhaps because it has a renewed confidence that the economy is on firmer footing and can withstand some monetary tightening. However, there is another consideration that is at least worth investigating.

We find it quite interesting that a bundle of economic data comes out this Thursday, including the first public look at Q3 GDP and September CPI. The consensus placed these figures at 9.5% and 3.6%, respectively, versus 10.3% and 3.5% during the previous periods. Today's sudden action might suggest that officials see growth running higher than expected, or worse, inflation on the boil. Even though senior officials in the PBoC and in the government insist prices remain contained, we suspect that pressures are rising to the consumer level. If this is true - and Thursday's indicators may well confirm this - then today's rate hike will be the first of many over the next few months. We will discuss the indicators upon their release.

James Pressler — Associate International Economist
James Pressler is an Associate International Economist at The Northern Trust Company, Chicago. He currently monitors emerging markets in sub-Saharan Africa, as well as several European and Asian countries.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


20 Oct 10, 21:33
I'd suggest inflation on the boil

The Chinese media today is a flood with reports of reasons why food prices are going up and showing all the government actions to dampen those effects. Main stream media reports the world over are somewhat unreliable but here, well....

My point is that the party mouth pieces are trampling themselves to get enough airtime to push the blame of rising inflation costs onto anything else. Weather, earthquake, those damn blasted aliens, anyone but the party is responsible.

One cant help but feel that something big is brewing to have them all a flap noticeably. The ongoing repeated announcements of the new 5 year plan calling for better wealth distribution rather than all out growth is a poorly hidden message that we are nearly losing control of this sucker.

Having lived here for a good while, I can attest to the fact that paying more for vegetables and food will much more quickly stir feelings of hostility in the public than the grotesque prices of housing. The two combined, I can already hear the marching of feet.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules