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PBOC sees inflation staying reasonable

(Agencies)
Updated: 2010-03-04 11:22

China's central bank can prevent inflation from spinning out of control this year and is also confident of easing inflation expectations, Su Ning, a deputy governor of the People's Bank of China (PBOC), said on Thursday.

"From the measures we have taken, I feel we can control inflation at a reasonable level this year," Su said at the Chinese People's Political Consultative Conference, a parliamentary advisory body.

Su said the central bank was closely watching price movements. Consumer prices rose 1.5 percent in the year to January, down from December's reading of 1.9 percent.

"Just as we successfully managed deflationary pressure last year, we believe we can successfully manage inflationary pressure this year," he said.

Su said the current moderate pace of inflation was?within the PBOC's expectation of?the implementation of?monetary policy.

He said the central bank had anticipated the spike in prices that occurred at the end of last year as early as mid-2009.

The PBOC has raised banks' required reserves twice since the start of 2010, but Su said such increases should not necessarily be viewed as a form of monetary tightening.

Rather, the higher reserve requirements were intended to absorb excess liquidity. The M1 measure of money supply, which measures cash and deposits readily available to spend, rose a stunning 39.0 percent in January from a year earlier, he noted.

"The PBOC has many monetary policy tools, including the deposit reserve ratio, open market operations and, of course, benchmark interest rates."

"The PBOC hopes it is capable at the right time of using the right tools to achieve its target," he said.