China increased banks’ reserve requirements to lock up cash and limit inflation after economic growth exceeded forecasts and consumer prices rose by the most since 2008.
Reserve ratios will rise a half point from April 21, the People’s Bank of China said in a one-sentence statement on its websitetoday. The move, taking the requirement to 20.5 percent for the nation’s biggest lenders, came less than two weeks after the central bank boosted benchmark interest rates.
Inflation accelerated to 5.4 percent in March and gross domestic product expanded 9.7 percent in the first quarter, a statistics bureau report showed two days ago. Central bank Governor Zhou Xiaochuan said yesterday that monetary tightening will continue for “some time” and he sees no “absolute” limit on how high reserve requirements can go.
Premier Wen Jiabao aims to cool inflation without derailing the recovery of the fastest-growing major economy. The International Monetary Fund says Asian economies risk boom-bust cycles if officials fail to tighten quickly enough to curb “nascent overheating pressures.”