Friday, October 22, 2010

IMF backs China's rate hike

IMF Washington headquarters,

WASHINGTON - THE International Monetary Fund on Thursday praised China's interest rate hike this week and called on the United States to weigh carefully any measures to support a weak economic recovery.

'We support the decision of the central bank of China to raise its rates,' said an IMF spokesman, David Hawley, in response to a question at a news briefing at the institution's Washington headquarters.

'Given the pace of recovery in China, it's appropriate that the central bank should continue to withdraw its monetary stimulus and return the pace of credit growth to more normal levels,' he added.

China announced on Tuesday it would hike two key interest rates by a quarter point each, effective Wednesday, in a bid to cool inflation amid powerful economic growth. On Thursday, Beijing said the economy expanded at an annual rate of 9.6 per cent in the third quarter, a slight deceleration from the prior quarter's 10.3 per cent pace. Consumer prices jumped 3.6 per cent in September alone, the biggest increase in two years.

In contrast to the tightening of monetary policy in China, the United States is widely expected to resume pumping billions of dollars to prop up a weak recovery from the worst recession since the Great Depression.

Federal Reserve chairman Ben Bernanke has clearly indicated he favours a new round of major asset purchases, known as quantitative easing. The central bank has held its key interest rate at virtually zero since December 2008 and has signalled no change in that policy 'for an extended time.' -- AFP

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