China Tells Banks to Boost Reserves as Prices Surge!
- Inflation is kicking up big time around the world. Rising prices in China will reverberate around the world as China is the factory to the rest of the world. The actions taken by China will result in a real estate crash, IMO. Property prices for the past few years have been rising at a ridiculous unsustainable pace. Where will the Chinese put their money? Gold and silver are the obvious answer! Rising inflation across the world is a direct consequence of the FedRes’ money printing! The FedRes’ actions are destabilizing the world, intentionally of course.
China Tells Banks to Boost Reserves as Prices Surge
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 website today. 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.
“Beijing did not take long to respond to the strong inflation number on Friday,” said Brian Jackson, an emerging markets strategist at Royal Bank of Canada in Hong Kong. “Today’s move suggests that another increase in interest rates is on the way soon.” He predicts two more rate moves this year, calling Zhou’s tone “hawkish.”
Extra liquidity from central bank bills maturing this month may have encouraged the fourth increase in reserve requirements this year. Today’s move may drain about 350 billion yuan ($54 billion) from the financial system, according to Bank of America Merrill Lynch.
Premier Wen Jiabao aims to cool inflation without choking off growth in the world’s second-biggest economy. The International Monetary Fund says Asian economies risk boom-bust cycles if officials fail to tighten quickly enough to curb “nascent overheating pressures.”
China is grappling with the aftermath of a record 17.5 trillion yuan of lending over 2009 and 2010 that drove up property prices, leading to official concern at the risk of social discontent. Taming inflation is the government’s top and “urgent” priority, China’s cabinet said after meeting in Beijing to review the performance of the world’s second- biggest economy ahead of the release of gross domestic product numbers.
Wen aims to hold inflation at 4 percent for the full year. While rising commodity costs are adding to price pressures, tightening measures and comparisons with higher year-earlier bases are likely to slow price gains in the second half of the year, according to HSBC Holdings Plc.
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