China Tightens Again, And Will Do So Again

Sunday’s further raising of banks’ reserve ratio requirements–the fourth such raise of the year–confirms that inflation is back at the forefront of policymakers’ concerns, with consumer price inflation hitting 5.4% in March, its highest in nearly three years, and officials now talking about 5%-plus inflation persisting into the third quarter. Banks will have to keep 20.5% of their capital in reserves from Apr. 21, an increase of half a percentage point. Along with higher interest rate rises, administrative controls on rising prices, though not much by way of yuan appreciation, the continued monetary tightening is still struggling to slow the growth rate substantially, suggesting there is more of the same to come.

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