China Boosts Reserve Rate To Fight Inflation

China increased the rate of reserves required of the country’s banks for the fifth time in five months as price growth remains uncomfortably high, according to Reuters.

China increased the rate of reserves required of the country’s banks for the fifth time in five months as price growth remains uncomfortably high, according to Reuters. On Friday, the People’s Bank of China announced that it would increase the reserve requirement ratio by 50 basis points to a record high of 19.5%, marking the fifth move of that size since October. The decision comes after annual consumer price inflation was recorded at 4.9% in January.

The reserve ratio move also comes after three interest rate increases by the central bank over the last four months, and the aggressive fiscal tightening aims to bring inflation within the 4% target sometime in 2011. The latest move did not come as a surprise, with a large amount central bank bills set to mature soon, which would flood the economy with additional liquidity.

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