CHINA still needs to raise its interest rate despite the harsher increase in the banks' reserve ratio requirement amid efforts to effectively curb inflation, according to the Bank of China.
The government should stick to a tight monetary policy and raise the interest rate "at a proper time" to ease inflation, the leading commercial bank said in a research report released yesterday.
A rate hike would help to end negative interest rates to become one of the most effective weapons against inflation, the report noted.
The May 12 devastating earthquake in Sichuan Province will not change economic fundamentals, but the massive investment during the post-quake reconstruction period might increase inflationary pressures, it said.
Some analysts have advocated relaxing monetary policy as the economy faced a slowdown on weaker export growth, following a spate of disasters from the worst blizzards in five decades earlier this year to last month's 8.0-magnitude quake.
The People's Bank of China has refrained from boosting interest rates this year after six increases last year. The central bank feared that further increases could attract more overseas speculative funds after the sharp rate cuts in the United States.
The central bank ordered a 1-percentage-point rise in the reserve ratio last Saturday, the fifth move this year.
The consumer price index, the major gauge of inflation, rose 8.5 percent in April, up from 8.3 in March and down from the 12-year high of 8.7 percent in February.