SHANGHAI (Reuters)- China’s latest official interest rate rise is likely to halt a rebound in its bond market and slow a bull run on the stock market, while boosting the yuan moderately after itsrecent weakness.
The central bank announced after the markets closed on Tuesday that it was raising one-year deposit rates by 27 basis points and its lending base rate by 18 points “to stabilise inflation expectations”.
The bond market had expected an interest rate increase sometime in the next few weeks after news last week that consumer price inflation jumped to 5.6 percent in July, the highest rate in over 10 years.
But loose money market liquidity over the past several days, and a flat yield at the central bank’s one-year bill auction on Tuesday, had made some traders think the central bank would wait until it saw August inflation data in mid-September.
