The central bank of China has raised the reserve ratio requirement for the third time in 2011 as inflation continues to pose a threat to the sustainability of the country’s rapid economic growth, according to Bloomberg. On Friday, the People’s Bank of China announced that starting Mar. 25, it would enforce an increase to 20% in the ratio of lenders’ deposits that must be held by the central bank. The move comes as consumer price growth was seen at 4.9% year-over-year in February, while producer prices were up 7.2% over that period.
The fight against inflation is expected to continue in the coming weeks, with Shen Jianguang of Mizuho Securities Asia forecasting that another interest-rate increase is just “a couple of weeks away,” and forecast that inflation would rise to 6% during March. Inflation has been above the government’s 4% target for 2011 during each of the past five months, and PBOC Governor Zhou Xiaochuan has indicated that interest rates will be a key tool in containing price increases.
