PBOC: Tight monetary policy to stay

Macroeconomics

14 April 2008

Zhou Xiaochuan, governor of the People's Bank of China (PBOC) has pledged to keep a tight rein on montetary policy despite rising inflation and global macroeconomic uncertainty, Bloomberg reported. Speaking at an International Monetary Fund meeting in Washington, Zhou also resisted calls for China to allow its currency to appreciate more rapidly in order to rectify trade imbalances and ease inflationary pressure. "Over-exaggeration of [the exchange rate's] function is not only impractial but will also misguide the course of such an adjustment," he said. The PBOC has yet to raise interest rates - a classic monetary tightening measure - so far this year, arguably because this only increases the flow of overseas money into China. In 2007, the bank raised rates six times, taking the key one-year lending rate to 7.47%.

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