Money

Bank of China expects delay in rate hikes: report

(Agencies)
Updated: 2010-06-07 14:40

SHANGHAI?- Bank of China's president no longer expects China to raise interest rates soon but instead may hike banks' required reserve rate, the China Securities Journal reported on Monday.

Bank of China had forecast that the People's Bank of China would raise benchmark interest rates once or twice in the second half of this year, by 27 or 54 basis points, but the official newspaper cited President Li Lihui as saying that any such move could be delayed amid projections that inflation will ease.

However, the central bank may still ask lenders to set aside more cash as reserves instead of using it for new loans, by raising the required reserve ratio "one to three times," Li said, although he noted such moves would depend upon economic conditions.

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He did not offer a timeframe for the expected hikes.

So far this year, the central bank has raised the required reserve level three times in an effort to temper robust economic growth by pulling back on the amounts banks can extend as loans.

Li also said he expects that banks' net interest margins would remain stable this year and that credit risks would be basically manageable, according to the newspaper.

Separately, Bank of China said on Monday that its 40 billion yuan ($5.9 billion) convertible bond offer was 43.5 times over-subscribed.