The People's Bank of China (PBOC), the nation's central bank, has denied media reports that its research bureau had sent a report proposing an interest rate rise to the State Council, China's cabinet.

"Those reports were sheer fabrication and totally groundless," said a statement published on the bank's website Monday.

The reports have had a "vicious impact" on the bank's research bureau and its staff, and the bureau "reserves the right to take further action," the statement said.

Many observers expect the central bank to raise interest rates later this year should earlier monetary policy moves--mainly three increases in bank reserve requirements--fail to contain rapid growth in bank lending and fixed asset investment.

At its second-quarter meeting earlier this month, the PBOC's monetary policy committee agreed that the state's macroeconomic measures have produced obvious results. It also pledged to use multiple monetary policy tools to adjust the liquidity of financial institutions to avoid major fluctuations in economic growth.

Some key economic indicators, including fixed asset investment, money supply and industrial production slowed noticeably in May. Rapid growth in those areas has prompted worries the Chinese economy is overheating.

Senior central bankers have also reiterated on several occasions recently the need to continue to monitor the situation closely before taking any further major action.

(China Daily June 22, 2004)