Tuesday, April 05, 2011

China Raises Interest Rates, Yuan

For the third time since Christmas, China raised interest rates. It has also repeatedly raised reserve requirements. Meanwhile, it has allowed the yuan to rise to a new record so that a dollar now only costs 6.5375. This however only implies a 1% appreciation since the beginning of the year.

For several reasons, including the need to diffuse international tensions, it would have been wise to use exchange rate appreciation more in the fight against inflation, but it appears that the political influence of exporters prevents this.