Feb. 18 (Bloomberg) -- China may let its currency appreciate by 5 percent as early as next month to prevent economic growth from stoking inflation, according to Stephen Jen of BlueGold Capital Management LLP.
Policy makers may also raise interest rates this year to cool an economy that expanded by 10.7 percent in the fourth quarter, the fastest increase in two years, Jen said in an interview this week. The central bank last week ordered lenders to boost the amount of cash they must put aside as reserves for the second time this year in an attempt to curb growth in loans.
“China is taking steps in the right direction, but the policies so far aren’t adequate,” said Jen, who helps to oversee about $1.5 billion as a managing director at BlueGold in London. “It will require a multi-faceted policy approach to deal with such a big, and sometimes volatile, economy. We expect rate hikes, and we expect a policy change” on the yuan.
China’s “first challenge is inflation expectations,” People’s Bank of China Deputy Governor Zhu Min said on Jan. 30. Goldman Sachs Group Inc. Chief Economist Jim O’Neill said on Feb. 15 a decision by China to revalue the currency as much as 5 percent “could happen at any time.”
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