Roubini Global Economics is reporting that there is growing speculation that China may hike interest rates before markets open on September 13—in line with RGE’s forecast for a rate hike in late Q3.
Nouriel Roubini is very well connected in China, so this report should not be taken lightly.
A rate hike would have immediate downside reaction in Asian markets and most likely globally. China has already been slowing money supply, this would slow money growth even further. Since China has been a key source of liquidity for the recent mini-recovery, the slowdown of its money pumping will result in an intensification of the second leg of the downturn.
A trader wrote me yesterday: "China has announced CPI to be released on Saturday as opposed to Monday - they have announced negative news over the weekend in the past in an attempt to minimize market effect. CPI number could come higher than expected raising the fear of more tightening."
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