PBOC Sees Risk of Rising Inflation, Vows to Keep Economy Stable - BNN Bloomberg

(Bloomberg) -- The People’s Bank of China warned the nation may see inflation accelerate due to changes in the economy’s overall demand, and pledged to balance supporting growth and maintaining stable prices.

The central bank “will pay serious attention to the underlying possibility of rising inflation, especially changes in the demand side,” it said in its quarterly monetary policy report released Wednesday. At the same time, the Chinese central bank added it will increase support for the economy and keep liquidity reasonably ample.

The comments came after the PBOC sought to maintain ample cash levels in the financial system through a combination of liquidity tools of different maturities on Tuesday, while keeping the key policy interest rates unchanged.  

Latest economic data showed a worse-than-expected slowdown in October, with retail sales contracting for the first time since May. As Covid outbreaks continue to spread at the fastest pace since April, the pressure is building for Beijing to provide further support after making major tweaks to Covid controls and introducing rescue measures for the property sector.

China’s inflation has been gradually picking up this year before moderating in October, as restrictions to control Covid outbreaks dragged on demand. The country has been spared from a global wave of monetary tightening as inflation remained relatively low when compared with other major economies.  

On the yuan, the PBOC said the currency has “solid foundation” to main stability around “reasonable and equilibrium” levels, and reiterated its stance to smooth major swings in the exchange rate. 

The yuan weakened rapidly against the dollar this year through October as China’s slowing economy and the PBOC’s loose monetary policy added depreciation pressure. It has rallied in November along with a global revival of risk sentiment, and as a slew of policy shifts by Beijing supported the currency’s outlook.  

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PBOC Sees Risk of Rising Inflation, Vows to Keep Economy Stable - BNN Bloomberg
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