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Last Updated: Tuesday, 21 August 2007, 15:13 GMT 16:13 UK
Bank lifts China's interest rates
Chinese food store
Higher food prices have led Chinese inflation
China's central bank has raised interest rates for the fourth time this year as it seeks to control inflation that has hit a decade-long high.

The country's benchmark lending rate will rise to 7.02% from 6.84% on Wednesday, while the main deposit rate will increase to 3.6% from 3.33%.

The move by the People's Bank of China comes after inflation hit 5.6% in July, fuelled by China's economic boom.

The annual rate of inflation was the highest recorded since February 1997.

Higher food prices

Although the timing of the latest interest rate rises came as a surprise, most economists had forecast that an increase should be expected in the near future after last week's inflation data.

Recent Chinese inflation has been fuelled by food prices, with the price of pork and other meats jumping 45% in the year to July.

"Inflation in China is largely due to supply side factors, for example, food prices which are not directly impacted by the monetary policy decision," said Dwyfor Evans, an economist with State Street Global Advisors in London.

"But to the extent it may cause a rise in inflation expectations, it's pretty prudent of the authorities to act."


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