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PBOC warns of inflation

2013-02-07 07:42 Xinhua     Web Editor: qindexing comment

China's central bank on Wednesday warned of inflationary pressure, saying the influence of rebounding demand, labor supply changes and global monetary easing on prices must be watched closely.

The recovery in the economy and in demand may translate into consumer price movements very quickly and "particular attention needs to be paid to the effect of changing expectations on future prices," the People's Bank of China (PBOC) said in its quarterly monetary policy report.

"During the stage of economic transition, the prevention of inflation risks should always be a highlight in financial macro-control," the report said.

The remarks came after China's inflation rate ticked up in the past few months as the country's economy ended a seven-quarter slowdown and accelerated to a 7.9 percent year-on-year growth in the fourth quarter of 2012.

The consumer price index (CPI), a gauge of inflation, grew 2.5 percent year on year in December 2012, up from 2.0 percent in November and 1.7 percent in October.

The National Bureau of Statistics is expected to release the January CPI figure later this week.

Although prices are relatively stable now, uncertainties are building up, the PBOC warned in the report.

As China's working-age population grows slower, prices of labor-intensive farm produce and services will trend up, it said.

Meanwhile, the ultra-loose global monetary supply will last for quite a long period, making it necessary to look out for potential imported inflation, according to the report.

The central bank reiterated that it will continue to implement a prudent monetary policy and make it more forward-looking, targeted and flexible.

It pledged to maintain a reasonable level of market liquidity and keep credit and social financing growing steadily and properly.

Credit support will be strengthened for key national projects, the rural sector, small enterprises, modern services and emerging industries, the PBOC said.

Speculation and investment demand in real estate will continue to be curbed, according to the central bank.

It noted that China's economy will hopefully maintain steady and relatively fast growth.

"The momentum of sustained growth remains strong and positive factors that can drive domestic demand up are increasing," it said.

However, the report stressed that the sluggish recovery of the global economy, the negative effects of monetary loosening abroad and the unbalanced economic structure domestically still present a complicated environment for China.

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