http://www.allamericangold.com/China Increases Bank Reserve Ratio to Cool Inflation March 18 (Bloomberg) -- China told banks to set aside more reserves for the second time this year, hours after Premier Wen Jiabao said the government will take ``forceful'' steps to damp inflation at an 11-year high. Lenders must place a record 15.5 percent of deposits with the central bank, up from 15 percent previously, the People's Bank of China said in a statement on its Web site today. The increase will take effect on March 25. China will tackle soaring prices with ``appropriate and forceful'' measures, Wen said at his annual press conference at the end of the National People's Congress in Beijing. Stocks tumbled the most in seven weeks on concern China's battle against inflation will slow the economy, which expanded 11.2 percent in the fourth quarter. ``Raising the reserve ratio is just a mild start'' for the government that was appointed yesterday, said Wang Tao, head of economics and strategy for Greater China at Bank of America Corp. in Beijing. ``A series of monetary tightening measures, including interest rate increases and stricter lending controls will be gradually rolled out.'' Central bank Governor Zhou Xiaochuan signaled today he may raise interest rates just as the U.S. is poised to cut them to stave off a recession. The central bank has held off on raising interest rates this year after six increases in 2007 that pushed the one-year lending rate to a nine-year high of 7.47 percent. Snowstorms Stoke Inflation Consumer prices rose 8.7 percent in February from a year earlier after the worst snowstorms in half a century paralyzed transport systems and destroyed crops. China's benchmark CSI 300 Index plunged 5.1 percent to the lowest in eight months in Shanghai. The index has slumped 30 percent this year on concern that a housing crisis would push the U.S. economy, China's biggest market, into a recession. The Federal Reserve may later today lower its overnight lending rate by a full percentage point to prevent a meltdown in financial markets as subprime woes breed widening losses among banks and securities firms. Wen today didn't comment on calls for faster yuan appreciation that some economists argue may help ease inflation by making imports cheaper. ``We need to weigh the pros and cons when adopting policies, as interest rate and currency policy each have advantages and disadvantages,'' he said. Yuan Gains The yuan rose to the highest since the end of its peg to the dollar on speculation a rate cut by the Fed would widen the yield advantage for Chinese-currency assets. The yuan advanced to 7.0815 per dollar at 5:30 p.m. in Shanghai, compared with a close of 7.0830 yesterday.