China may raise money market rates after Fed: central bank adviser

BEIJING (Reuters) – China's central bank could opt for small rate increases in its open market operations should the U.S. Fed raises rates, a central bank adviser said in remarks published on Wednesday.

But there was no need for the central bank to check out the Fed's rate increases in the end, Sheng Songcheng, an adviser towards People's Bank of China (PBOC), told the Chinese financial news outlet Yicai.

"Even though PBOC is still planning to raise loan rates slightly in open market operations, China does not need to keep to the Fed to get interest rates in the long run, not to mention raise benchmark deposit and lending rates," Sheng said.

Sheng said China's interest rates were a lot higher than these of foreign countries, and its particular consumer inflation remained modest.

China's central bank would try to look for methods to steer its market rate adjustments and additional cuts in banks' reserve requirement ratios (RRR), Sheng added.

The Fed, concluding a two-day meeting on Wednesday, is expected to announce a 25-basis-point rate increase, this year's second.

Market watchers believe the PBOC will in all probability follow by raising its key money market rates on Thursday, while benchmark rates unchanged, as it did in the past rounds of Fed rate increases.

Markets have generally expected another RRR decline in the 2nd half right after a surprise loss of April, with speculation it can come as early as June or July.