4 Dec 2010

China to tighten monetary policy

10:51 am on 4 December 2010

The Communist Party says China is to tighten its monetary policy next year, in a sign that interest rate rises may be on the way.

The BBC reports that lending rules have recently been tightened with banks being told to keep more cash in reserve.

Xinhua news agency said the Communist Party Politburo has said China will shift its monetary policy from "relatively loose" to "prudent".

Annualised consumer price inflation hit a 25-month high in October, at 4.4%.

That is well above the government's full-year target of 3%.

Food prices are mostly responsible for the rise, but there have been further price pressures due to higher global commodity costs.

China's key stock index closed flat on Friday, dropping 1% on the week.