CHINA unexpectedly raised interest rates yesterday, the first increase for 34 months, to curb asset price bubbles and keep a rein on inflation.

From today, the one-year benchmark deposit rate will rise to 2.5 percent from 2.25 percent while the one-year benchmark lending rate will increase by 25 basis points to 5.56 percent, the People's Bank of China said.

Apart from the current deposits rate, which is unchanged at 0.36 percent, rates on deposits and loans of other maturity all rise.

The impact of the rate hike was felt by global markets across the board. Oil prices fell, stock markets turned negative in Europe and the dollar rose as investors were caught off guard by the tightening step.

"The interest rate rise is entirely outside of market expectations," Zhu Jiangfang, chief economist at CITIC Securities in Beijing, told Reuters.

"The recent rise in headline inflation has put the real rate into negative territory. And I think that's why the central bank needs to raise interest rates in such a hasty way," he said.

The central bank didn't outline the reasons for the rate increases, but analysts said that concern about higher inflation could have been the major driver.

"It's very likely that the September inflation rose to a new high, driving the central bank to act," Lu Zhengwei, an Industrial Bank senioreconomist, said last night.

"The monetarypolicy is de facto turning around - with reserve requirement rate increases, interest rate rises and open market operations to soak up liquidity, you can't still call it loosening," Lu said.

However, China's official stance on its monetarypolicy is that it remains relatively loose.

Zuo Xiaolei, a Galaxy Securities analyst, said more interest rate rises are likely.

The last increase was in December 2007. China cut its interest rates four times in the last two months of 2008 to counter the global financialcrisis and rates had remained untouched since then.

Economists have said they expect China's September consumer price index to rise to between 3.5 percent and 3.9 percent.

Consumer prices in China rose at their fastest pace in 22 months in August at 3.5 percent, compared with advances of 3.3 percent in July and 2.9 percent in June.

China is due to post the consumer price index and economic growth for the third quarter tomorrow.

The Chinese Academy of Social Sciences warned over the weekend that China might have to raise its annual inflation target this year from 3 percent to 4 percent with September data expected to show consumer prices at a two-year high.

The real estate sector is also said to be one of the targets of the increase. House prices in China remained high in September, despite earlier central government controls.

Real estate prices in 70 major cities on the Chinese mainland rose 9.1 percent year-on-year last month, extending year-on-year gains for 16 straight months.

The September rise was down from a growth of 9.3 percent in August.

"This is a bucket of cold water for the market," Zhang Yuheng, an analyst with Capital Securities.

• yesterday [´jestədi] n.&ad.昨天；前不久 (初中英语单词)
• deposit [di´pɔzit] vt.存放，存储 n.存款 (初中英语单词)
• outline [´autlain] n.外形 vt.画出...轮廓 (初中英语单词)
• industrial [in´dʌstriəl] a.工业的，产业的 (初中英语单词)
• financial [fi´nænʃəl] a.金融的，财政的 (初中英语单词)
• academy [ə´kædəmi] n.专科学校；学会；协会 (初中英语单词)
• annual [´ænjuəl] a.每年的 n.年刊 (初中英语单词)
• estate [i´steit] n.财产；庄园；等级 (初中英语单词)
• despite [di´spait] prep.尽管 (初中英语单词)
• negative [´negətiv] a.否定的 n.否定词 (高中英语单词)
• senior [´si:niə] a.年长的 n.前辈 (高中英语单词)
• requirement [ri´kwaiəmənt] n.需要(的东西)；要求 (高中英语单词)
• relatively [´relətivli] ad.比较地；相对地 (高中英语单词)
• counter [´kauntə] n.计算者；柜台；计算机 (高中英语单词)
• crisis [´kraisis] n.转折点；危机 (高中英语单词)
• consumer [kən´sju:mə] n.消费者；用户 (高中英语单词)
• bucket [´bʌkit] n.水桶 (高中英语单词)
• unexpectedly [´ʌniks´pektidli] ad.意外地；突然地 (英语四级单词)
• maturity [mə´tjuəriti] n.成熟；完备 (英语四级单词)
• economist [i´kɔnəmist] n.经济学家；节俭的人 (英语四级单词)
• headline [´hedlain] n.(报纸的)标题 (英语四级单词)
• policy [´pɔlisi] n.政策；权谋；保险单 (英语四级单词)
• weekend [´wi:kend, ,wi:k´end] n.周末休假 (英语四级单词)
• mainland [´meinlənd] n.大陆；本土 (英语四级单词)
• unchanged [ʌn´tʃeindʒd] a.不变的；依然如故的 (英语六级单词)
• impact [´impækt] n.影响，作用；冲击 (英语六级单词)
• monetary [´mʌnitəri] a.金融的；货币的 (英语六级单词)
• untouched [ʌn´tʌtʃt] a.原样的；未触动过的 (英语六级单词)
• august [ɔ:´gʌst] a.尊严的；威严的 (英语六级单词)