China raises interest rates again as inflation refuses to ease

China today announced another round of interest rate hikes within six months, in a bid to check rising inflation which threatens to derail markets and affect its exports.

This is the third rate hike since China began a monetary tightening in October.

The People's Bank of China today raised the benchmark one-year deposit rates by 25 basis points to 3 per cent and the one-year lending rates by 25 basis points to 6.06 per cent, with immediate effect.

The People's Bank of China raised the one-year yuan lending rate by 25 basis points to 6.06 per cent from 5.81 per cent, and the one-year yuan deposit rate by 25 basis points to 3.00 per cent from 2.75 per cent.

The monetary tightening announced at the close of China's Lunar New Year holiday, is aimed at reining in price pressures and warding off a property bubble.

China recorded inflation of 4.6 per cent year-on-year in December 2010, as rising food prices caused a surge in inflation.

The rate hike has been a damper on global commodity markets, which fell after the Chinese central bank announced the rate hike. Markets fear a tighter monetary policy will dampen demand in a country that now acts as an engine of growth for the global economy.

Copper futures fell below $10,000 a tonne and US crude futures also dropped. Stock markets also lost some steam following the announcement.