Flexible exchange rate helps monetary policy effectiveness: PBOC official

23:37, July 26, 2010      

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A more flexible exchange rate could boost the effectiveness of China's monetary policies, according to a high official of the People's Bank of China (PBOC), the central bank, in a document released Monday.

"A more flexible exchange rate would help China control inflation and asset bubbles," wrote Hu Xiaolian, deputy governor of the PBOC in a paper on the central bank's website.

As China needed to import a large amount of primary products, exchange rate adjustments would reduce "imported" inflationary pressures, wrote Hu.

She also considered a more flexible exchange rate was helpful in slowing the pace of capital inflows and the accumulation of foreign exchange reserves, thus helping realize "more stable and sustainable development, and stable and orderly growth of monetary supply."

A flexible exchange rate was good for directly dealing with external economic shocks, she said.

On June 19 of this year, the PBOC announced it would further reform China's exchange rate system, and increase its flexibility.

Source: Xinhua


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