China Raises Banks’ Reserve Ratios Again

China’s liquidity sponge just keeps on dabbing. The central bank has raised banks’ reserve requirements ratio again, by half a percentage point, taking it to 19% for most banks. It is the first such move of the year, but follows six increases in 2010. December’s consumer price inflation numbers, due out next week and expected to show a 4.7% year-on-year rise, are likely to show that inflation peaked in November at 5.1%. But with the money supply, on its broadest measure, M2, increasing by 19.7% last year and new bank lending getting off to a brisk start to the year, there is plenty of mopping up still to do.

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