China’s holiday greetings: a 25 basis point rate hike

China’s scramble to battle inflation continues. On Saturday, Christmas Day in many parts of the world, the People’s Bank of China raised interest rates 25 basis points. The benchmark one-year lending rate is now 5.81%, and the one-year deposit rate is set to 2.75%. More details and analyst commentary on Bloomberg: “China Increases Interest Rates to Curb Its Fastest Inflation in Two Years.”


This holiday season may get more expensive for the kids

Bloomberg reports that Wal-Mart “…raised prices on hundreds of toys this month..” While these price hikes come on the heels of numerous discounts, it is still a curious development given Target and Toy R Us have been taking share from Wal-Mart in the competitive market for toys.

We will be watching whether these price hikes can be sustained through the remainder of the holiday season.


Inflation Expectations Are Not Contained in China

In “Chinese Consumers Signal Deepest Concern With Prices Since 1999“, Bloomberg reports that inflation expectations are definitely not contained in China.

A survey conducted by China’s central bank reveals troubling trends in inflation expectations amongst the Chinese people on the heels of the biggest increase in price levels in 28 months and food costs soaring 12%:

“A price satisfaction index fell to 13.8 this quarter, the lowest level since data began in the fourth quarter of 1999, the central bank said on its website today.

In total, 74 percent of households considered prices too high, up 15.6 percentage points from the third quarter, the central bank said. Its fourth-quarter survey was of 20,000 households in 50 cities.

Inflation expectations are ‘intensifying,’ the central bank said, with 61 percent expecting price gains in the next quarter. In the previous survey, the proportion was 46 percent.”