s of tightening steps to cap inflation and prevent the world's fourth largest economy from overheating. The increase capped a week in which the government reported that consumer inflation spurted to 6.5 percent in the year to August, the fastest pace since December 1996.
"It was inevitable. Beijing will probably continue to raise rates in the next six months or so unless the U.S. slows very sharply," said Paul Cavey, an economist with Macquarie Securities in Hong Kong.
The People's Bank of China said it was ordering an increase of 0.27 percentage point in commercial banks' benchmark one-year deposit and lending rates to stabilise inflationary expectations, slow credit growth and brake the pace of investment.
Inflation has been a root cause of unrest in China down the ages, most recently in the run up to the 1989 pro-democracy protests in Beijing's Tiananmen Square that were put down by the army.
