Commentary management of inflation need to

 Central bank announced the rate hike is expected

 control inflation with the property market

 effective integrated development effort needed to curb inflation

 supporting policies to increase the use of production inputs

central bank has announced that from February 9, 2011 beginning a one-year benchmark deposit and lending interest rates will rise 0.25 percentage points. This is expected to do. On the one hand is in line with the central government's real estate regulation, on the other hand is to curb inflation.

general, favorable interest rates to curb inflation. However, we should also see to be truly effective inflation, interest rates alone is clearly not enough. After the hike, if a large outflow of funds from real estate and stock markets, focus on the product market, then inflation is not only difficult to suppress, and there may be climbing.

we must understand under what conditions, the central bank to raise interest rates to control inflation? First, a lot of money to be withdrawn from circulation to the bank, the situation must change the negative interest rates; the second is liquidity must be evenly distributed in the product market, money market and capital market, that is, not too concentrated in one area, such as real estate, such as the stock market. The author believes that the current situation, we should not wishful thinking to believe that interest rates can be effectively continuous inflation.

First of all, China's capital, especially large-scale liquidity in the past mainly in the real estate market and the stock market, the emergence of asset bubbles and real estate bubble. Severe pressure now because real estate prices, the gradual withdrawal of speculative funds will enable most of the real estate market, in addition to part of the stock market, the considerable part of funds may be speculation in commodities, daily necessities and some luxuries, such risk than the current room real estate and stock market is much smaller. It is bound to push up inflation.

Secondly, inflation is mainly driven by higher prices of agricultural products. Extreme due to global climate change, so that all countries face the failure of agriculture; and this year, especially this year, the majority of our grain-producing area is facing severe drought, harvests will be affected, and thus prices of agricultural products on the whole, the upward trend. Control of the stock market prices of agricultural products is much more difficult than the control.

Third, imported inflation, including the outside of iron ore, and agricultural commodities, due to appreciation of the renminbi, these goods more competitive abroad, and easier to enter the domestic market through various channels, driving the price of production ( PPI) and consumer prices (CPI) rise, thus promoting the domestic inflation continued to rise.

All in all, these problems are not raising interest rates could be resolved.

inflation pressure this year, the inflation rate may exceed 5% of the cordon. Macroeconomic policy-making department may adopt tight monetary policy, this seems to raise the deposit reserve ratio of Canadian interest rates is still high. I believe that the interest rate increase this year (including the interest rate) may be 5-6 times, one-year deposit rate, or up to 5%.

year the central bank will face a dilemma: inflation consecutive rate hike, will inevitably affect business investment and production, thereby affecting the national economy. If you want to keep the economy healthy and stable development, in addition to monetary policy, but also support other policies, such as increasing product supply, control prices, especially agricultural prices, increased production of the investment.

He Vida (The author is professor of Beijing University of Technology)