China Raises Interest Rate in Christmas Surprise

Tuesday, December 28, 2010

12/27: Chinese shoppers expressed their anxiety about soaring consumer prices, despite a weekend interest rate hike and reassurances on live radio from the premier that inflation can be curbed (STR/AFP/Getty)

On Christmas Day, the Chinese central bank raised interest rates 0.25 percent, or 25 basis points, to 5.81 percent. It's the second such hike in just over two months, and comes in response to inflation and rising food prices in China. In response, the price of U.S. crude oil dropped slightly, amidst concerns the high Chinese demand for oil will slow; world markets dipped due to fears that increased interest rates could soften demand for other commodities. How should we understand the Chinese government’s decision? Was this a difficult move toward domestic fiscal responsibility, or a sneak attack on international markets?

For more we’re joined now by David Denoon, Professor of Politics and Economics and Director of the NYU Center for US - China Relations.

Guests:

David Denoon

Produced by:

Hsi-Chang Lin

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