Archived IMT (2011.02.08)

CHINA RAISES 1-year lending and deposit rates by 25 bps to 6.06% and 3% respectively, effective Feb 9. This is the 3rd interest rate hike (Oct 19, Dec 25 and today) from the PBOC in an effort to contain lending and temper inflation, currently at 4.6%. The rate hike announcement comes 1-day before Chinese markets return from the Chinese New year Holiday. Inflation slipped to 4.6% in December from 2 year high of 5.1% in November. Markets are taking the China hike in stride because as many 4 rate hikes are priced in this year. Only when Chinese economic data start to cool down further would markets show a real worry that the obligatory tightening aimed at containing inflation would upset the economy. Note the Jan manufacturing PMI slowed to 52.9 (lowest in 5 months). FX markets remain in tight ranges (EUR supported above 1.3520 whole facing resist at 1.3720, Aussie capped at 1.02 & GBPUSD shows lower highs on 4-hr chart, vulnerable to 1.6020s.