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April 22, 2011 at 08:56 AM
The Agricultural Bank of China (Agbank) released a research note on Friday that foresees an additional increase in the country's benchmark interest rate and reserve ratios, as well as higher consumer inflation and faster appreciation of the yuan against the dollar.
Reuters reported that the strategic planning unit of the state bank predicted that inflation may hit 6.0% in June. In March the rate was 5.4%, a 32-month high. "As CPI in the second quarter will be higher than in the first quarter, it is still necessary for China to increase interest rates," the research note said.
Benchmark interest rates have been increased four times since October, and the People's Bank of China has increased the required reserve ratio (RRR) four times in 2011; it now stands at an all-time high of 20.5%. The research note said that the RRR may be increased again in the next two months; this fits with last week's comment by Zhou Xiaochuan, governor of the central bank, who said there was no upper limit on the RRR and that money tightening policies would continue for a while.
