BEIJING: China's central bank said Friday it would raise the amount of money banks must keep in reserve, in the latest of a series of moves aimed at bringing high inflation under control.
The reserve requirement ratio will be raised by 50 basis points from February 24, the People's Bank of China said in a statement already the second time this year it has announced such a measure.
The move comes less than two weeks after the bank raised interest rates for the third time in four months as Beijing struggles to keep control of soaring prices, which it fears could lead to social unrest.
It also follows the release of data on Tuesday showing consumer prices rose 4.9 percent last month, well above the government's targeted ceiling of four percent for the year and up from 4.6 percent in December.
The figures suggest Beijing's attempts to cool spending, which has sent prices of everyday goods such as food and fuel soaring, have not yet born fruit.
"It's indicative of a greater sense of policy urgency out of Beijing in the last few months, in response to this concerning pick-up in inflation," said Brian Jackson, senior strategist at the Royal Bank of Canada.
"They're using every policy tool at their disposal, and that's all they can do. They were a little bit slow to get moving on the monetary policy tools and now they're playing a bit of catch-up, so that's what we're seeing."
Tuesday's data showed food costs continued to see strong growth last month, with grain prices up 15.1 percent, the government said. The grain supply situation has become an increasing source of official anxiety as a drought across northern China over the past four months is threatening the important winter wheat crop.
At the same time, prices of fresh fruit grew 34.8 percent. Inflation, particularly related to food, has a history of sparking unrest in China, particularly among the poorer segments of the population. It has become a hot issue for the government as the economy fizzes along after the global financial crisis and last year overtook Japan as the world's number two economy after the United States.
Economists blame the huge stimulus measures introduced by Beijing during the downturn for sending prices soaring.
Beijing is also concerned high property prices will lead to a real estate bubble that could burst with calamitous results for China.
The latest hike brings the average reserve requirement ratio to 19.5 percent, Dow Jones Newswires reported.
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