The People’s Bank of China said in its latest Monetary Policy Report for Q4 that there is still plenty of room for using monetary policy tools, lessening the significance of the central bank to purchase assets such as Chinese government bonds from the financial market on a large scale. There is also no need to implement so-called quantitative easing, The Paper reported.
The PBOC said it will keep its prudential monetary policy, strengthen counter-cyclical adjustment, maintain ample liquidity and a stable market interest rate, The Paper reported.
Compared to the Q3 report, the PBOC left out the wording of “neutral” when mentioning monetary policy, the report said.
The PBOC further explained that a prudential monetary policy does not mean the monetary condition will remain unchanged. Instead, the money supply should match the requirements of stabilizing economic growth and prices, which means preventing economic overheating and inflation during the upswing, while fighting a recession and deflation in the downturn.
The PBOC also pointed out that it expects the consumer price index will climb moderately, while the producer price index remains uncertain as it is affected by international commodity prices and domestic demand.