RRR raised 50 basis points
19 March 2008
China's central bank raised the reserve requirement ratio 50 basis points to a record 15.5%, the South China Morning Post reported. This is the 15th time the ratio has been raised since mid-2006. The People's Bank of China is continuing its efforts to manage liquidity using higher interest rates. Recently, liquidity has been increased by strong growth in foreign direct investment. However, analysts said the central bank is now constrained in its interest rate policy because of a widening interest rate gap with the US and an expected global economic slowdown. Analysts expect the ratio to be raised as often as once every two months this year. The reserve requirement ratio is the portion of deposits banks must hold in reserve.
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