Another Dab Of The Liquidity Sponge

Mopping up all the inflation-stoking credit sloshing around the economy continues: The People’s Bank of China has raised banks’ reserve ratios by a further half of a percentage point to 18% for most large banks and 18.5% for the big four, effective Nov. 29. It is the second rise in two weeks and the fifth this year. It will take an estimated 350 billion yuan ($53 billion) out of the financial system. Compare that with the 7.5 trillion yuan of new bank loans that is this year’s official target, and the best that can be said is that every little bit helps. We see nothing in the move to dent our conviction that a further rise in interest rates will happen sooner rather than later.

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Filed under Economy

One response to “Another Dab Of The Liquidity Sponge

  1. Pingback: Manufacturing’s Robustness Allows More Interest-Rate Hikes | China Bystander

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