China’s central bank said yesterday it would raise the amount of money banks must keep in reserve, in the latest move to rein in lending and bring inflation under control.
The reserve requirement ratio will be raised by 50 basis points, the People’s Bank of China said in a brief statement — the third time this year it has announced such a measure.
The move — effective from Friday next week — follows three interest rate increases since late last year as China battles to control soaring prices, which leaders fear could lead to social unrest.
China’s inflation rate has remained stubbornly high and last month it came in at 4.9 percent, well above the government’s full-year target of 4 percent, despite persistent efforts to reduce prices and ease growing consumer anxiety.
Chinese Premier Wen Jiabao (溫家寶) told China’s legislature earlier this month that reining in prices was the government’s “top priority” this year as the country strives for a more balanced 8 percent growth rate.
High inflation and lending activity has fueled continued speculation of further interest rate increases or other policy measures aimed at cooling the world’s second-largest economy.
The move also comes as data out earlier yesterday suggested recent policy tightening measures had been effective, with more cities seeing a fall in house prices last month from the previous month.
The cost of a newly built home in eight of the 70 major cities tracked fell last month from January, the National Bureau of Statistics said. Just three cities had shown a decline in January.
While prices in 68 cities rose last month from February last year, analysts said the month-on-month data showed official measures to rein in soaring prices were kicking in.
Wen has said that the government would ramp up a campaign to construct affordable housing amid growing public concern over rising prices.
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