Federal Reserve Board Chairman Ben S. Bernanke claimed that China’s resort to higher interest rates in addressing its inflation problem was to his astonishment when responding to a Representative’s inquiry at a House Budget Committee hearing on February 9. He also urged to see further renminbi appreciation.
From the perspective of China’s central bank, an interest rate rise, rather than a currency revaluation is considered as the most appropriate and effective means to curb inflation. Setting aside the fact that exchange rate is crucial to economic sovereignty, currency revaluation should also be of national interest.
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