Media Based Assignment 2
Interest Rate Hike in China
I decided to look at the video “Interest Rates Hike in China.” China is raising interest rates by a quarter of a percentage point. The interest rate increase will be for the rate that banks to pay to borrow from each other and the interest rates businesses have to pay for loans. Chinas is tightening its economy because it is worried about inflation and overheating. Other countries are trying to speed things up and Chinas is trying to slow things down. Chinas economy is growing by more than 9%. China is the fastest growing economy, the second largest economy. If China slows things down it could have a ripple effect for the rest of the world relying on china for its products and demand. Most economists say that this will not have a major impact on markets. On the contrary, the Federal Reserve is meeting on November2 and 3 to talk about QE2 (quantitative easing part 2) extraordinary measures that would add more liquidity more dollars to the economy to jump start the U.S. economy. (Eisen)
In addition I found in an article titled “China Raises Rates, Jolting World Markets” that said that China was increasing its rates because “it is struggling against stubborn inflation, soaring housing prices and an overly buoyant economy that is pumping out exports, resulting in the accumulation of huge amounts of foreign exchange reserves. [A Hong Kong-based economist from the Credit Suisse stated in an email], “Yet it may only have limited impact on the real economy because overall rates are still at excessively low levels. This move probably will dampen sentiment in the property sector and equity market in the short run. However, we think excess liquidity will still prevail, if this is just a one-off rate hike” (Barboza & Heuser). The rate increase is something that has been expected to happen since March. In March Bloomberg News posted, ““We believe the central bank sees inflation as a...