China central bank says inflation still high

 Published: 1/30/2011 5:44:01 AM GMT
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BEIJING (AFP) – China's central bank governor warned on Sunday that inflation is higher than expected and that banks' reserve ratios could be tightened further to soak up excess liquidity in the economy.

People's Bank of China Governor Zhou Xiaochuan said that although the rise of prices slowed slightly last month, it was stronger than anticipated, Dow Jones Newswires reported.

"Inflation is still higher than many people expected. It may be still going up a little, so we should keep vigilant on that," Zhou said on the sidelines of meetings in Kyoto, Japan.

Asked whether China needed to again raise banks' reserve requirements due to the excessive liquidity conditions, he answered: "Maybe we need to continue our efforts."

Ever fearful of inflation's historical potential to spark social unrest, China's leaders have been pulling on a variety of levers to rein in consumer prices and tame runaway house prices.

Beijing has launched a series of monetary tightening measures, including two interest rate hikes and a number of bank reserve requirement ratio increases over the last year in attempts to dampen rising consumer prices.

China's consumer price index, or CPI, rose 4.6 percent on-year in December, down from 5.1 percent in November, which was the fastest rate in more than two years.

The full-year CPI climbed 3.3 percent, exceeding Beijing's official target of three percent. The government has raised its target to four percent for 2011, as it is forced to acknowledge its limits in constraining prices.

China's economy unexpectedly accelerated in the fourth quarter, expanding 9.8 percent on-year, stronger than 9.6 percent growth in the third quarter. That took the full-year gross domestic product growth rate to 10.3 percent in 2010, up from 9.2 percent in 2009.


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