The reserve requirement will increase 50 basis points effective Feb. 25, the People’s Bank of China said on its Web site today. The current level is 16 percent for big banks and 14 percent for smaller ones.
China’s policy makers aim to avert asset bubbles and restrain inflation after flooding the economy with money last year to drive the nation’s recovery from the first global recession since World War II. The central bank said yesterday that it wants to gradually normalize monetary conditions from a “crisis mode” after gross domestic product expanded a more- than-forecast 10.7 percent in the fourth quarter from a year earlier, the fastest pace in two years.
“Liquidity continues to flood the financial system this year,” said Lu Zhengwei, a Shanghai-based economist at Industrial Bank Co. “The central bank needs to stay ahead of the curve by tightening before inflation starts to gain pace.”
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