Central Bank Announces Increase In Deposit Reserve Ratio

On the evening of 10, the central bank announced the increase.

Citibank released a report on the morning of 11, saying that although the action to raise the deposit reserve rate on the evening of 10 nights reduced the urgency of raising interest rates, it was estimated that the interest rate would be raised by 25 basis points before the end of the year, in response to the need to combat inflation data.

And when the inflation situation is more stable in 2011, the central bank's interest rate increase will continue.

Wang Qian, chief economist of JP Morgan China, said

Wang Qian said that the move to raise the deposit reserve ratio and the recent rate hike are aimed at further recovering excess liquidity to manage the overall monetary environment.

"Policymakers are shifting the focus of macroeconomic policy to controlling inflation," Wang Qian said.

In addition, China's policymakers are concerned about the impact of the Federal Reserve's quantitative easing policy on global liquidity, which needs special attention to the trend of inflow of hot money for China.

Citibank also said that the central bank's deposit reserve ratio on the evening of 10 nights was due to the need to tighten the currency and hedge against the negative impact of the Federal Reserve's $600 billion quantitative easing policy.

On the evening of 10, the people's Bank of China announced that the deposit reserve ratio of deposit financial institutions should be increased by 0.5 percentage points from November 16, 2010.

This is the fourth time since 2010 that the central bank has raised the deposit reserve ratio.

Prior to this, the Fed issued a statement on the 3 day, said it plans to complete the total amount of $600 billion treasury bond procurement project by June 2011, which is slightly larger than the amount of $500 billion previously widely expected.

Meanwhile, the Fed decided to keep the Fed's benchmark interest rate between 0 and 0.25% of the record low.

Interest rates have not changed since December 2008.

The Fed also maintained the phrase "maintaining interest rates at a very low level for quite a long time" in the policy statement.

On the 11 day, the latest statistics released by the National Bureau of statistics showed that CPI rose by 4.4% in October, a 24 month high.