China’s Central Bank is Not Ready to Set Inflation Target

The governor of China’s central bank, Zhou Xiaochuan, said on Friday that the monetary policy of China has intended to support economic growth and control inflation. Speaking at a forum in Beijing, the governor said that China was not ready to adopt an inflation target in proper form for its monetary policy.

“In China, we are not ready to adopt inflation targets as part of the policy of the central bank,” he said.

Wednesday, the People’s Bank of China raised interest rates for the third time since the beginning of the year. Zhou Xiaochuan said Friday that this tool, however, was not the best for the government to fight against inflation.

He cited quantitative measures such as the required reserve ratio of banks.

Analysts are divided in their predictions on the interest rate policy of China. If some think that the cycle of nine months of tight monetary policy is coming to an end, others point out that inflation remains high.

Local conditions dictate the central bank to choose its means of struggle against inflation, and in the case of China, quantitative measures may be more effective, said Zhou Xiaochuan.

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