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PBOC: Too soon to loosen grip on economy

By Wang Xiaotian  (China Daily)

09:38, November 17, 2011

BEIJING - China can't loosen inflation control because the foundation of domestic price stability is not yet strong enough, the central bank said in a quarterly report on its website on Wednesday.

Inflationary pressure might arise from "extremely loose" global monetary conditions, still robust domestic economic expansion and rising labor costs as well as a potential increase in resource product prices, though the fall in prices could accelerate if economic growth declines further, the People's Bank of China (PBOC) said.

"We will continue the prudent monetary policy ... and fine-tune macroeconomic policies when it is appropriate in accordance with changes in the domestic and global economic situation."

The central bank said it will maintain reasonable credit growth and continue interest rate liberalization and yuan exchange rate reforms.

A survey the PBOC conducted in the third quarter found that inflation expectations for the fourth quarter have risen among Chinese households. Nearly 50 percent of the 20,000 households surveyed in 50 cities believed consumer prices will rise, even though the year-on-year growth of the consumer price index, a main gauge of inflation, has been declining since August.

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