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

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.