In a continuing effort to reduce inflation and keep market bubbles from forming, China's central bank on Friday raised required reserves for lenders for the fourth time in a bit over two months. The move was not without consequences on the world markets, as stocks fell, taking gold and other commodities with them. The euro fell, too, after first continuing Thursday's gains against the dollar.
Chinese lenders must now maintain reserves of 19.5% on hand, an increase of 50 basis points, and while this is already a record high, a poll of economists in December by Reuters showed expectations that reserves will hit 20% by June.
Reuters reported that the action came as Beijing tried to stem the flow of rising prices and ward off social unrest. With the inflation rate at a 28-month high of 5.1% as of November, the costs of food and property are skyrocketing; China had repeatedly expressed concern over the possibility of a real estate bubble.
