China’s central bank believes the Federal Reserve’s quantitative easing is ineffective and cannot address fundamental economic problems and may lead to excessive global liquidity, Reuters reported. According to a report issued by the People’s Bank of China (PBoC), the Fed’s quantitative easing policy is creating imported inflation and short-term capital inflows which are pressuring emerging markets. The PBoC said that as a result of the Fed’s actions, China needs to work to soak up liquidity from forex inflows in order to minimize the impact on the domestic economy. The central bank said it would use interest rates, bank reserve requirements and open-market operations to dampen money supply and credit growth.
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