The People's Bank of China (PBOC), the nation's central bank, Monday denied media reports 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," the bank said in a statement published on its website.

The reports have resulted in a "vicious impact" on the bank's research bureau and its staff, and the bureau "reserves the right to take further actions," 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 continued rapid growth in bank lending and fixed investment since last year.

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 investment, money supply and industrial production slowed down noticeably in May. Rapid growth in those areas has prompted worries the Chinese economy is overheating.

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

(China Daily June 22, 2004)

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