More surprise than rise

19 Oct 2010 By John Foley Follow @johnsfoley

The country’s first interest rate increase since 2007 may take the edge off stirring inflation, but won’t stop property prices rising or savings from being eroded. Still, hiking rates only a bit gives China room to strengthen its cheap currency. That would be a welcome sequel.

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China's central bank raised its benchmark oneyear interest rates by 25 basis points with effect from Oct. 20, in the first increase since 2007. Following the move, the lending rate will be 5.56 percent, and the deposit rate 2.5 percent.

China's monthly consumer price data and GDP figures are due for release on Oct. 21. In the second quarter of 2010, China's GDP increased 10.3 percent year on year, compared with a 9.1 percent rate for the whole of 2009.

The central bank raised the amount the biggest banks must hold in reserve on Oct. 11, Reuters reported. The temporary 50 basispoint increase raised the required reserve ratio to 17.5 percent.

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