BEIJING (Reuters) - China will keep monetary conditions tight in its effort to rein in stubborn inflation, the country’s central bank said on Friday, adding that containing domestic price pressures remains its priority.
“We should continue to implement a prudent monetary policy and continue to treat price stabilization as the top priority,” the People’s Bank of China said in a statement following its quarterly policy meeting.
The central bank said inflation remains high and that it will use a mix of policy tools to keep liquidity in check, seen by analysts as one of the root causes of price rises in the world’s second biggest economy.
The bank said monetary policy should be more targeted and effective and said it would pay attention to its “strength and rhythm.”
“Our economy maintains stable and relatively fast growth. Inflation pressures have eased, although they are still at a high level,” it said.
The bank also said the economy is moving in the “expected direction,” although the world economy faces many uncertainties.
China Premier Wen Jiabao echoed the central bank’s cautiously upbeat remarks on the growth outlook at home. In comments carried by state radio, Wen said the Chinese economy is still growing at a stable and relatively brisk pace.
Speaking at China’s National Day celebrations, Wen also said China has “effectively” contained rapid gains in consumer prices.
As the world economy sputters amid mounting debt problems, China has been holding off on further policy tightening — though few analysts expect any meaningful policy easing in the near term.
China’s annual inflation pulled back to 6.2 percent in August from a three-year high of 6.5 percent in July and is widely expected to cool steadily for the rest of 2011.
Facing global headwinds, the country’s manufacturing sector contracted for a third consecutive month in September, the HSBC purchasing managers index showed on Friday.
But plenty of cash continues to slosh around the economy and food costs are still soaring, making it too early for Chinese leaders to declare they have inflation under control.
Since last October, the central bank has raised interest rates five times and banks’ reserve requirement ratios — the percentage of cash deposits they must set aside in their vaults — nine times.
The central bank also reaffirmed its long-standing policy of improving the yuan’s mechanism to better reflect market forces while keeping the exchange rate basically stable.
The yuan closed near its lowest daily trading limit versus the dollar from the central bank’s mid-point on Friday after trading mostly at the limit during the session.
Analysts and traders say they do not expect to see China changing its policy to let the yuan depreciate gradually.
Reporting by Langi Chiang, Aileen Wang and Kevin Yao; Editing by Don Durfee, John Stonestreet