For the third time so far this year, China's central bank raised interest rates in an effort to quell inflation. Despite a slowing economy, the bank remains concerned about rising prices and their potential for unrest.
The new rates add 25 basis points to benchmark one-year lending rates, for a total of 6.56%, and also add 25 basis points to benchmark one-year deposit rates, for a total of 3.5%. The bank announced on its website that the new rates will take effect on Thursday.
China's economy, although slowing, has seen an inflation rate of 5.5% in May, a 34-month high. Beijing has been worried that excess liquidity and high inflation, with skyrocketing commodity and real estate prices, could lead to social disruptions, and has focused on reining in price increases through interest rate increases and rises in required reserve ratios for its banks.