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Archive for 19. January 2010

China continues to reign in loose monetary policy

China has rattled financial markets by moving faster than expected to tighten its grip on liquidity as a strong recovery and rising asset prices threaten to cause overheating in the world’s third-largest economy.

Societe Generale said in a research note in the wake of Tuesday’s auction that the central bank’s wording of “flexible and targetted” was currently still tightening.

“The hike in the reserve requirement and the draining of liquidity while in fashion with the notion of flexibility and targetting, cannot be dismissed as anything other than tightening no matter how minor at this stage,” SG said.

China is leading again, this time putting the brakes on by raising interest rates and tightening bank reserve requirements to arrest runaway stock market and real estate speculation. Will the rest of the world follow?

Read  More here.

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