China raises reserves required by lenders
China’s central bank raised lenders’ required reserves for the fourth time in just over two months, stepping up the fight against inflation that it has vowed will be a top priority for the year.
By forcing banks to lock up more cash with the central bank, Beijing hopes to drain excess money from the economy and tame rising prices, which it worries may stir social unrest.
The move, well anticipated after China’s top leaders planted the task of taming inflation at the top of their agenda, underscores the central bank shift to “prudent” monetary policy in December, from its previous “moderately loose” stance.
With inflation expected to stay elevated in coming months, barring a temporary dip in December from 28-month highs analysts believe more tightening is on the cards.
“The rise is within market expectations, showing that the central bank is really concerned about inflation,” said Dong Xian’an, chief economist at Industrial Securities in Beijing.
“We expect the central bank to raise interest rates once or twice more in the first quarter, and we expect two more RRR rises in the same period.”