China Monetary Policy


Inflationary pressures prompt reserve requirement ratio increase

On 14 June, the People's Bank of China (PBOC) hiked the reserve requirement ratio (RRR) for the biggest lenders by 50 basis points to 21.5%. With the June RRR increase, the PBOC has raised the percentage of deposits that banks must hold in reserve for the sixth time this year by a total of 300 basis points. The PBOC decided to tighten the reins as inflation in May accelerated at the fastest pace since August 2008, showing the Central Bank's commitment to struggle against rising prices, which have the potential to fuel social unrest. At the current level, consumer prices are well above the official target for the year of 4%.

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