China fights inflation with bank reserves hike

April 18th, 2011 - 2:34 pm ICT by ANI  

Beijing, Apr 18 (ANI): China’s Central Bank has raised the amount of money that banks must hold in reserve by 50 basis points, to mop up excessive liquidity and control inflation in the country.

China stepped up moves to head off inflation by raising bank reserve requirements for the fourth time this year.

The People’s Bank of China announced the 50-basis point rise will come into force on from April 21 and will take the required reserve ratio for China’s biggest banks to 20.5 per cent.

It is estimated that the move will soak up about 376.4 billion Yuan from the market, and affect lending of about 1.71 trillion Yuan, the China Daily quoted Dong Xian’an, chief economist with Peking First Advisory, as saying.

Abundant liquidity this month makes the decision necessary, with 900 billion Yuan of central bank bills due to return, analysts said.

The measure came after the central bank raised interest rates for the fourth time since October on April 5, and the consumer price index (CPI), a key inflation gauge, rocketed to 5.4 percent in March, a 32-month high. (ANI)

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