IMF welcomes China's interest rates hike
(AP)
Updated: 2006-08-25 06:55
The International Monetary Fund on Thursday welcomed China's latest move to
raise interest rates.
Officials said more steps were needed to cool off an economic boom that the
Beijing government worries could spark a financial crisis.
"While the recent increases in reserve requirements and benchmark deposit and
lending rates are welcome steps, a significant risk still remains that
macroeconomic policies are not sufficiently tight," David Hawley, the IMF's
assistant director of external relations, said at a news conference.
He said additional cuts in interest rates "would drain liquidity form the
banking system and guard against continuing rapid credit growth."
China raised interest rates last week for the second time in a month. It also
pushed up deposit rates, apparently trying to discourage investment by making
savings more attractive.
The move, following an increase in April, suggested Chinese leaders believe
measures already in place are failing to cool an economy that grew by 11.32
percent in the second quarter.
Hawley said the Chinese authorities have taken important steps to slow credit
and fixed investment growth to more sustainable levels.
"However, economic activity remains strong, driven by net exports and
investment, while inflation is low," he said.
Hawley said economic policies "should continue to be geared toward
restraining investment growth."
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