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PBOC raises banks' required reserve by 50 basis points

11-11-2010 08:43 BJT

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China's central bank has raised the reserve ratio requirement for banks, effective next Tuesday. Analysts say it indicates China is stepping up efforts to mop up excess cash in the economy.

On Wednesday night, the People's Bank of China raised the deposit-taking institutions' required reserved ratio by 50 basis points to 17.5 percent.

The central bank has raised the lenders' required reserve three times already. Last month, it increased the required reserve for six commercial banks, and raised the benchmark interest rate.

The tightening comes after China reported its biggest monthly trade surplus in three months for October. And as the US Federal Reserve moved to inject cash into its domestic market. It added to concerns about an acceleration in hot money inflows into China, potentially fueling inflation and asset bubbles.

Analysts say requiring banks to keep more money at the central bank will drain funds from the financial system, which may relieve some inflationary pressures.

They predict the central bank will raise the required reserve ratio again within the year.


China hikes bank reserves to ease inflation expectations

The People' s Bank of China, or the central bank, announced it would raise the deposit reserve requirement ratio (RRR) for Chinese financial institutions that accept deposits by 50 basis points from Nov. 16, which was estimated to freeze more than 300 billion yuan (45.1 billion U.S. dollars). Full story >>


Liu Baocheng, professor from the University of International Business and Economics

Will there be interest hikes near term?

Editor:Xiong Qu |Source: CNTV.CN

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