What should we make of the rumoured RRR hike?

Reuters is reporting that the required reserve ratio (RRR) for major banks has been raised. The People’s Bank (PBC) has not confirmed the move, but if true the best explanation is that the large banks are being rapped over the knuckles for loosening credit policy too fast. But the PBC seems to have no wish to tighten policy by forcing banks to stick to the annual quota. Interest rate hikes still seem unlikely.

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