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China fights inflation by raising borrowing costs again

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China fights inflation by raising borrowing costs again

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China’s central bank has raised interest rates again, for the second time in just over six weeks.

It is Beijing’s latest move against stubbornly high inflation and to ward off a property price bubble.

With inflation running near its fastest in over two years, Beijing hopes higher rates will encourage savers to keep more of their money in banks and also reduce demand for mortgage loans.

This was expected by investors, but the timing was a surprise, coming on the final day of China’s Lunar New Year holiday.

“It is the first interest rate rise in the Year of the Rabbit, but it will not be the last,” said Xu Biao, an economist with China Merchants Bank in Shenzhen.

Anti-inflation talk from the central bank in recent months has primed investors for more tightening.