Thursday, 7 July 2011

China raises interest rates

China continued its tightening campaign on Wednesday. AFP/CNA reports:

China's central bank said Wednesday it will raise its benchmark deposit and lending rates by 25 basis points, the third rate hike this year, in the latest round of monetary tightening.

The move comes as the government places priority on fighting rising inflation and despite recent fears of an economic slowdown in China...

In a statement on its website, the People's Bank of China, the central bank, said it will raise the one-year yuan lending rate to 6.56 percent from 6.31 percent, and the one-year yuan deposit rate to 3.50 percent from 3.25 percent.

The ECB is expected to raise rates on Thursday, especially after an unexpected increase in German factory orders in May. From Bloomberg:

Factory orders in Germany, Europe’s largest economy, unexpectedly increased in May, led by domestic demand for investment goods such as machinery.

Orders, adjusted for seasonal swings and inflation, increased 1.8 percent from April, when they surged a revised 2.9 percent, the Economy Ministry in Berlin said in a statement today. Economists had forecast a drop of 0.5 percent, according to the median of 33 estimates in a Bloomberg News survey. In the year, orders rose 12.2 percent, when adjusted for work days.

However, data on the US services sector for June turned out weaker than expected. Bloomberg reports:

Service industries in the U.S. expanded at a slower pace in June, a sign the economy cooled at the end of the first half of 2011.

The Institute for Supply Management’s index of non- manufacturing businesses decreased to 53.3, less than projected, from 54.6 in May. Economists forecast the gauge would drop to 53.7, according to the median estimate in a Bloomberg News survey. A reading above 50 signals expansion.

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