THE government should raise interest rates to counter the effects of inflation and curb asset-price gains, said Justin Lin Yifu, the World Bank’s next chief economist.

“If the central bank doesn’t raise interest rates, real deposit rates will be negative,’’ Lin told reporters yesterday in Beijing at a meeting to prepare for the National People’s Congress. “I advocate China keeping interest rates flexible to keep real rates positive and to control asset prices.’’

The government hasn’t raised rates in 2008 even as inflation reached an 11-year high of 7.1 percent in January, boosted by food and energy shortages caused by snowstorms. Higher rates risk attracting money from abroad into an economy already flooded with cash from China’s record trade surpluses.

“The central bank may need to raise rates as soon as this month because inflation may have been even higher in February because of the disruptions from snowstorms,’’ said Xing Ziqiang, an economist at China International Capital Corp. Deposit rates may rise more than lending rates, Xing said.

China raised interest rates six times last year. Both lending and deposit rates are at nine-year highs. The most recent increase took effect Dec. 21.

Inflation higher than the benchmark one-year deposit rate of 4.14 percent makes it harder for the government to rein in asset prices, as people switch money from bank accounts to stocks and property. The lending rate is 7.47 percent. (SD-Agencies)