China Rate Swaps Advance for a Fifth Month on Inflation Outlook

China’s interest-rate swaps rose for a fifth month on speculation policy makers will curb the availability of cash to stem inflation running at the fastest pace since 2008.

The increase in the consumer price index this year is unlikely to be less than 5 percent, compared with the government’s 4 percent target, the China National Radio reported, citing Wang Jian, secretary-general of the China Society of Macroeconomics. Lenders were ordered on Aug. 26 to set aside reserves on a broader range of deposits, according to a People’s Bank of China document obtained by Bloomberg News.

“The policy move shows that the PBOC is still concerned with inflation,” said Liu Li-Gang, chief China economist at ANZ Banking Group Ltd. in Hong Kong.

The one-year swap rate, the fixed cost to receive the seven-day repurchase rate, rose 24 basis points this month to 4.41 percent as of 4:32 p.m. in Shanghai. The rate, which touched a record 4.52 percent yesterday, was down two basis points today.

Inflation may exceed 7 percent in November, when selling of the autumn grain harvest will begin, the China National Radio cited Wang as saying. Consumer prices rose 6.5 percent in July, the most in three years, official data showed this month.

The seven-day repurchase rate, a gauge of funding availability, decreased 16 basis points this month, or 0.16 percentage point, to 4.94 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It surged 87 basis points this week.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net