China raises interest rate in Christmas surprise

On Christmas Day, the Chinese central bank raised interest rates 0.25 percent, or 25 basis points, to 5.81 percent. It’s the second such hike in just over two months, and comes in response to inflation and rising food prices in China. In response, the price of U.S. crude oil dropped slightly, amidst concerns the high Chinese demand for oil will slow; world markets dipped due to fears that increased interest rates could soften demand for other commodities. How should we understand the Chinese government’s decision? Was this a difficult move toward domestic fiscal responsibility, or a sneak attack on international markets?

For more we’re joined now by David Denoon, Professor of Politics and Economics and Director of the NYU Center for US – China Relations.