RBS’s Simpfendorfer Says China May Delay Raising Interest Rates

Ben Simpfendorfer, an economist at Royal Bank of Scotland Plc, comments on the People’s Bank of China’s decision to raise banks’ required deposit reserve ratio today. The central bank will raise the ratio by 50 basis points effective Dec. 20.

Simpfendorfer commented in a note distributed after the central bank’s decision.

“The People’s Bank of China may shortly hike its policy rate, the one-year lending rate. But today’s decision coupled with the recent fall in vegetable prices also provides reason to delay until early first quarter.”

“That said, the economy would benefit from higher rates. Exports are surprisingly resilient. The combination of easy credit, a property bubble in many cities, and worsening structural inflation all argue for higher rates to cool growth and prevent inflation expectations from deteriorating. However, the imbalances in the composition of growth, especially the reliance on credit and construction, are a restraint on more decisive action.”

--Li Yanping. Editor: John Liu

To contact Bloomberg news staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net

To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.