China Hikes Rates For Second Time In 2011, Fourth Since October

Tyler Durden's picture

One hour ago the PBOC announced the most recent Chinese rate hike, second in 2011, and fourth since October 2010, in the country's ongoing fight with excess-liquidity driven (both courtesy of the Fed and the PBoC itself) inflation, which has been running near a 28-month high of 5.1% hit in November. Benchmark one-year deposit rates will be lifted by 25 basis points to 3.25 percent, while one-year lending rates will be raised by 25 basis points to 6.31 percent, the People's Bank of China said in a statement on its website. The hike will be effective beginning Wednesday, April 6. 

Bloomberg with some more on China's inflation fighting strategy:

“Inflation pressures are mounting globally and will push prices higher in China during the course of the year, especially if oil prices remain high,” Dariusz Kowalczyk, a Hong Kong-based economist at Credit Agricole CIB, said before the announcement. “The central bank needs to send a message that it is doing what it can to maintain price stability.”

Consumer prices jumped 4.9 percent in February from a year earlier, topping the government’s full-year target of 4 percent. Premier Wen Jiabao has described inflation as a tiger that “once set free will be very difficult to put back into its cage” and also as a potential threat to social stability.

Besides monetary tools, the government has deployed subsidies, state food reserves and the threat of price controls. Unilever, the world’s second-largest consumer-goods maker, and Tingyi (Caymen Islands) Holding Corp., China’s biggest maker of packaged food, have postponed planned price increases at the government’s request.

The benchmark one-year deposit rate has lagged behind the pace of consumer-price gains, an incentive for households to switch savings to asset markets.

“The issue of negative real interest rates has not been resolved and it is very important to bring them closer to positive territory otherwise asset-price bubbles will emerge,” Kowalczyk said

So while Jan Hatzius is thinking of the best way to spill to Bill Dudley (and thus Ben Bernanke) that Jon Hilsenrath may have been leaked the wrong no QE3 data last week, China is making it clear, courtesy of its policy-style economy where every output metric is carefully picked in plenary session, that any further reliquification of the market will not be taken too lightly.

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hugovanderbubble's picture

Short France and Germany


CAC till 3966

DAX 7062

Ted K's picture

So, are we to guess from this China rate hike the U.S. markets will be red approximately one hour and then magically turn green around 10:30New York time???  Sell-side hypnosis is getting so damned boring.  I hope the Primary dealers have enough tissue to clean their inner thigh when they're finished.

magpie's picture

Buy the smoking crater

whatz that smell's picture

10:30? you are a pessimist! why do you hate america so much?

praise be the bernank! may his helicopters shower cocaine and hookers forever!


magpie's picture

Helos might need lots of new drop tanks to reach their new targets in East Asia and Southern Europe.

jkruffin's picture

This should help push gold and silver to new highs:

"House of Representatives Speaker John Boehner on Monday told fellow Republicans to prepare for a government shutdown, undercutting optimism that progress is being made on a deal that would keep the government running.

Boehner and other congressional leaders are due to meet with President Barack Obama on Tuesday to try to make headway on the plan, which would slice roughly $33 billion from this year's budget and ensure that the government will keep running beyond midnight on Friday, when current funding expires.

Boehner instructed his fellow Republicans in an evening meeting to draw up plans on how the House would operate if the government were to shut down, although he said he would continue to negotiate, an aide said."

orangedrinkandchips's picture

Someone gets it! It is fucking reckless to have rates at 0 forever. Shit, if you are not going to use them why have them at all? Aside from QE1,2,3 or whatever, the Fed is reckless as a drunk driver trying to text at night.

Good job China! hell yes. LET'S TRY TO LIVE ANOTHER DAY beacause the way the US is going now we are not going to be around very long.



ivana's picture

Somewhere along chinese tightening cycle we can expect shy FED tightening. At very end - trade wars and demonizing of chinese in general.
Seems that may coincide with USA elections end of 2012.

Before all that some black swans from EU.

TexDenim's picture

What do the Chinese have to do before we get the message? This is like the proverbial frog in a pot of warming water on the stove. By the time it starts to get really hot, he's too sapped of energy to do anything about his predicament, and so he boils to death.

orangedrinkandchips's picture



reminds me of Meatballs the movie. I havent seen it in years but the one part with Spaz helping his dad back up the car...."keep coming Dad....keep coming....youre ok......BOOM!....stop dad!"


same thing

TexDenim's picture

Yes! Meatballs! Great analogy! That brings back old memories.

jkruffin's picture

Looks like Turbo Timmy isn't letting off the gas:


Date Security
Term Security
Number Auction
Date Issue
Date Maturity
Date   03-31-2011 364-DAY BILL 9127953H2 04-05-2011 04-07-2011 04-05-2012   04-04-2011 28-DAY BILL 912795VE8 04-05-2011 04-07-2011 05-05-2011   04-07-2011 91-DAY BILL 9127952Z3 04-11-2011 04-14-2011     04-07-2011 182-DAY BILL 9127953P4 04-11-2011 04-14-2011     04-07-2011 3-YEAR NOTE 912828QC7 04-12-2011 04-15-2011     04-07-2011 9-YEAR 10-MONTH NOTE 912828PX2 04-13-2011 04-15-2011     04-07-2011 29-YEAR 10-MONTH BOND 912810QN1 04-14-2011 04-15-2011
Sizzurp's picture

The scary part is that the inflation we are seeing now is likely due to QE1 rather than QE2.  There is about an 18 month delay in the inflationary effects of rapid monetary expansion.  We shouldn't see the real whopper of price increases hit until early 2012.  The fat lady is just warming up.   It should be quite an election season in the midst of hyperinflation.  Can't wait for all the political spin trying to explain unheard of price increases.  A bigger war is coming.

thames222's picture

At least China is showing some means of reducing inflation.  We should take a page out of their book and start hiking more and more.  The war is coming, it's true.