Economy

China should raise rates - central bank adviser

(Agencies)
Updated: 2010-05-12 16:19

China should raise benchmark deposit rates as a defensive move to stabilise inflation expectations, a central bank adviser said in comments published on Wednesday.

More worrisome than the 2.8 percent rise in consumer prices in the year to April was the 0.2 percent month-on-month increase, said Li Daokui, an academic adviser on the central bank's monetary policy committee.

"This indicates that price trends are extremely serious, requiring a high level of attention," he told the Beijing Morning Post.

Li is one of three academic advisers to the People's Bank of China, a position which gives him knowledge of official thinking but little influence over policy decisions.

A professor at Qinghua University, Li has been relatively hawkish since his appointment as an adviser earlier this year, repeatedly saying that the central bank should consider raising interest rates.

In his latest comments, Li said that it was important for the central bank to stabilise savers' and investors' expectations by breaking the trend towards negative real rates.

The benchmark one-year deposit rate is currently 2.25 percent.

Many analysts expect consumer prices to continue to climb in coming months and officials have said that it will be a challenge for China to keep average inflation over the full year below 5 percent.