China’s consumer price inflation rose a faster-than-expected 2.7% in February, the sharpest increase since October 2008. Coming on the heels of Tuesday’s strong import/export data and amid a surge in real estate speculation, China’s central bank may take more action to quell growth in the world’s most populous nation.

The People’s Bank of China (PBOC) has raised bank reserve requirements in recent months, but may now feel compelled to hike its lending rate, something it hasn’t done since 2007. In addition to the data above, the PBOC must be concerned that the nation’s banks made 1.39 trillion yuan in new loans in January, or 18.5% of the government’s full-year target, according to Xinhau.

Rapid bank lending in China and the reaction of its central bank stands in stark contrast to developments in the U.S., where the Fed is trying (unsuccessfully so far) to spur bank lending vs. tamp it down.

As Henry and I discuss in the accompanying clip, the real story here is how China’s economy has gone from the proverbial tail wagging the dog to where the PBOC has become the “swing” central bank for the entire global economy.

“The China tightening trade is increasingly becoming synonymous with risk aversion; primarily via lower commodities and a more robust U.S. dollar,” writes Ashraf Laidi, chief market strategist at CMC Markets in London.

This trend could explain some of the dramatic intraday volatility in commodities like gold, copper and oil in recent days. And while the U.S. stock market has been noticeably quiet this week – and again midday Thursday – don’t be surprised if stock traders don’t start taking their cues from China’s central bank in the near future — especially now that the Greek “crisis” has passed.

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