Beijing, Apr 5 China’s People’s Bank of China (PBOC), the country’s central bank, raised the benchmark one year borrowing and lending interest rates by 25 basis points with effect from tomorrow.

This was the second time that China’s central bank raised the benchmark interest rates this year and the fourth such increase since last year.

After the hikes, the one-year deposit interest rate will climb to 3.25 per cent, while that of the one year loan will reach 6.31 per cent, official agency Xinhua reported. Analysts said the move indicated that the central bank was enhancing efforts to ease stubborn consumer price increases.

China’s inflation, jumped 4.9 per cent in February from a year earlier, exceeding the government’s full—year target of 4 per cent. Food prices, which account for about one-third in the basket of goods used to calculate China’s CPI, surged by 11 per cent in February from a year ago.

“It’s widely expected that the reading of March’s CPI will hit a new high. The interest rate rise is the central bank’s advance response to the pressure of rising inflation,” Mr Liu Yuhui, an economist with government think tank Chinese Academy of Social Sciences, said.

Rising oil and commodity prices on the global markets will also push prices higher in China during the year, said Mr Lu Zhengwei, chief economist with Industrial Bank.

Mr Lu expected China’s inflation reach a new high of 5.2 per cent in March, adding, there would be another two or three benchmark interest rate hikes during the rest of the year.

To mop up the excessive liquidity that helps fuel inflation, the central bank has raised the reserve requirement ratio for commercial banks nine times since the beginning of last year.

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