Money

China to continue prudent monetary policy

(China.org.cn)
Updated: 2011-05-11 16:26

China will continue to implement a prudent monetary policy, a People's Bank of China (PBOC) official told China Business News on Tuesday.

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Analysts predict the PBOC will not raise the deposit reserve ratio or interest rates again if the consumer price index (CPI) and housing prices maintain steady or drop continuously for three consecutive months.

PBOC has raised interest rates, exchange rates and the deposit reserve ratio several times this year in an attempt to tighten money supply and fight inflationary pressures.

The monetary policy has proven to be effective. China's CPI, a key gauge of inflation, has become relatively stable, and real estate prices have not seen sharp increases. New loans issued from January to April this year dropped 10 percent over the same period last year.

Shao Yu, chief analyst at Beijing-based Hongyuan Securities, warned about the decline in sales under the current monetary policy.

China's producer price index (PPI), a major measure of inflation at the wholesale level, will continue to rise, Shao said. It is expected to reach 8 percent in May, which will definitely have negative impact on asset prices, Shao added.