Chinese c.bank chief says inflation under control, promises ‘normal’ monetary policy

The governor of China’s central bank said inflation is “basically under control” and monetary policy would remain stable, in comments a day after concerns over inflationary pressures were fueled by data showing the fastest rise in factory price in China. 12 years showed.

“We must prioritize policy stability and stick to carrying out normal monetary policy,” Yi Gang told a financial forum in Shanghai on Thursday, forecasting inflation for this year at less than 2%.

“Keeping interest rates at a good level is conducive to the stable and healthy development of the markets,” said the governor of the People’s Bank of China (PBOC).

Yi said Chinese interest rates, while higher than major economies, are still relatively low in emerging and emerging economies.

Yi also reiterated that the central bank will in principle keep the yuan’s exchange rate stable while promising to further improve China’s exchange rate mechanism.

China has recently taken a series of measures to curb the rapid appreciation of the yuan, which has reached a three-year high against the dollar, thanks to China’s robust economic recovery and attractive yields.

INFLATION

Data released on Wednesday showed that Chinese factory gate prices rose in May at the fastest pace in more than 12 years as a result of rising raw material prices. read more

Yi said this was largely the result of a low last year, adding that there is controversy over how long the soaring rise in global inflation — fueled by sharp increases in oil and commodity prices — would last this year.

China also reported consumer price data on Wednesday, showing a 1.3% increase for May – the largest year-on-year increase in eight months.

But it was still well below the government’s official target of about 3%, and Yi said he expected average annual inflation to be below 2% this year.

“Of course there are uncertainties in the overseas pandemic, the economic recovery and macro policy, so we need to be alert to both inflationary and deflationary pressures in many respects,” he said.

GROWTH POTENTIAL

The potential growth rate of China’s economy is slowing, and future expansion should be driven by rising productivity and reforms, rather than capital and labor investment, Yi said, citing an aging population.

China’s monetary policy should pay attention to the impact of structural changes on price stability, he added.

In an aging society, people tend to save more and consume less, curbing inflation, but a green transformation could drive inflation up due to rising costs of fossil fuel use, Yi said.

The central bank governor said the PBOC will take a number of measures to help China achieve its carbon neutrality goals, including harmonizing green finance standards with the European Union, establishing a climate-related information disclosure system and encouraging from capital support to green finance. sectors.

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