China’s Premier Wen Jiabao said monetary policy needs a “moderate tightening” to prevent the economy from overheating, Bloomberg said today. However he didn’t say when the country will do so.
The People’s Bank of China has raised interest rates twice this year and ordered commercial lenders five times to set aside more money as reserves. It’s four weeks since the central bank raised benchmark interest and deposit rates and banks’ required reserve ratios and widened the trading band for the yuan.
Wang Qing, chief China economist at Morgan Stanley in Hong Kong said “Monetary tightening of some form is now imminent, or perhaps in a matter of days … Measures could include an interest-rate or reserve-ratio increase … Monetary policy needs to be “stable with moderate tightening” to prevent the economy from overheating”
Inflation accelerated in May to 3.4 percent, the fastest pace in more than two years. The benchmark Composite Index of Chinese mainland stocks has doubled this year amid warnings of a bubble. China’s money-supply growth stayed above the central bank’s 2007 target for the fourth month in May. M2, which includes cash and all deposits, rose 16.7 percent from a year earlier, after gaining 17.1 percent in April. The target ceiling is 16 percent.
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June 14th, 2007 by financetwitter
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