PBOC to make borrowing more costly
10 September 2007
The People's Bank of China has announced that it intends to put an end to negative real interest rates brought on by high recent inflation, signaling a potentially substantial increase in borrowing costs over the next 12 months, the Financial Times reported. Inflation due to soaring food prices hit a 10-year high in July at 5.6%, outstripping the bank's one-year deposit rate of 3.6%, which is subject to a 5% withholding tax. The central bank has already increased commercial banks' reserve requirements seven times this year, and China has lifted interest rates four times this year in an effort to control liquidity.
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