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China Rate Interest Rate Hike

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Excess liquidity also behind move, more increases expected this year

BEIJING - The central bank on Tuesday raised interest rates for the third time since mid-October by another 25 basis points, to help mop up liquidity and tame surging inflation.

Effective on Wednesday, the benchmark one-year lending rate will increase to 6.06 percent from 5.81 percent, and the one-year deposit rate will rise to 3 percent from 2.75 percent, the People's Bank of China (PBOC) said in an announcement on its website.

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Oh dear Merv! ;) pressure mounting?

The old guard in the BOE must still think it's 1970 when they were masters of their own fate. External forces will mean they have to raise rates and very soon. The longer they leave it the larger the eventual increments.

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Trouble is this won't work, inflationary pressures are global China acting on it's own isn't going to contain the problem and it appears the US is deliberately trying to create inflation.

You also have the other problem that the global economy has had low inflation and large monetary growth for so long now it's rebalancing time where inflation catches up with monetary growth.

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In 2010 Chinese CPI rose 3.3 % and UK's rose 3.7%. Apparently their CPI target is 3.0% so they are another country doing far better at meeting their inflation target than the UK.

So China's inflation is lower than the UK's - and UK's RPIX was about 4.7% and RPI (excluding housing) was 5.4%.

Apparently Chinese food prices rose 9.6% from a year earlier to compare with the 20%+ seen for a lot of UK food prices in recent months and that combined with packets of stuff being reduced in size.

Some replacement windscreen wipers in the UK have even being shortened in length.

In comparison to the Chinese the UK's inflation rate seems totally out of control.

Relatively the UK's economy is pretty much long gone.

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You have to take into consideration that eating at home in China is about 30% of their expenses whereas in the UK it is probably about 6% definitely less than10%

Any idea why then (Home consumed) Food & non-alcoholic Beverages make up 10.8% of the UK HICP (or CPI, whatever you wanna call it)?

Edited by Sledgehead
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