BEIJING (Reuters) – China’s central bank on Thursday said it would keep policy flexible and precise to boost domestic demand, while maintaining price stability, amid signs of a patchy economic recovery and rising deflationary risks.
In its quarterly policy implementation report, the People’s Bank of China said the authorities face some difficulties and challenges in promoting an economic recovery amid global uncertainties.
“Prudent monetary policy should be flexible, moderate, precise and effective… and keep the scale of social financing and the money supply in line with the expected goals of economic growth and price levels,” the bank said.
The central bank will “strengthen policy coordination and cooperation, effectively support promoting consumption, stabilising investment, expanding domestic demand, and maintaining prices at a reasonable level”, it said.
The world’s second-largest economy has been grappling with weak consumer demand and slowing prices, forcing the central bank to ease policy, although it faces limited room to manoeuvre due to worries over capital flight and yuan stability.
Data on Thursday showed China’s consumer prices fell at their steepest pace in more than 14 years in January while producer prices also dropped, ramping up pressure on policymakers to do more to revive an economy low on confidence and facing deflationary risks.
The PBOC said it would “promote the marketisation of deposit interest rates to drive the overall interest rate level downward.”
The bank added that it would also make good use of its pledged supplementary lending facility to support the property market, which weighs heavy on China’s economic growth prospects despite having once being a pillar of the economy.
The bank reiterated that it would keep the yuan exchange rate basically stable at a reasonable level.