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Interest rate appropriate for now: official

By Xin Zhiming (China Daily)
Updated: 2007-02-14 09:32

The assistant governor said that while the CPI is the most important index, the central bank will also monitor other indicators, such as the producer price index, the retail price index and export and import price indices, as well as investment.

"We will make adjustments on the basis of changes in those factors."

Yi expressed the central bank's firm determination to curb excessive inflation. "Once there emerges any sign of that, we will take timely measures."

The People's Daily on Monday published an article by Wu Xiaoling, vice-governor of the central bank, who argued that raising interest rates would not resolve excess liquidity.

The article contradicts the central bank's latest quarterly monetary policy report's emphasis of the role of interest rates and has been widely interpreted as a shift in the central bank's stance on raising the rate. The central bank yesterday said on its website that the article was based on Wu's speech in late November and does not represent its stance on its current interest rate policy.

Yi said that Wu's article was misinterpreted.

"Her major point was that the paramount task (for the central bank) is to mop up excessive liquidity," Yi said.

"The interest rate remains a primary tool of monetary policy," he added.

Lehman Brothers said in its report released on Friday that rising production costs would lift China's CPI to about 2.3 percent in 2007 and it will not "get out of hand."

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