China Fights Inflation by Hiking Bank Reserve Requirements
China’s central bank says it will raise the amount of reserves the country’s banks must maintain by one-half point to 19.5% this week—the second time this year and the eighth time since the start of 2010 that it has taken that step.
Economists say Beijing hopes that requiring banks to retain larger reserves will drain liquidity from the economy, thus cooling inflation. The same reason prompted the bank to raise its key lending rate three times in the past five months to about 7%.
China’s consumer prices increased 4.9%, including a 10% jump in food prices. On Sunday, the government hiked the retail prices of gasoline and diesel fuel 4% and 5%, respectively.