To Use Monetary Policy To Tighten Money Supply
Fri, Jun 27 2008, 20:09 GMT
http://www.djnewswires.com/eu
UPDATE:PBOC Zhou:To Use Monetary Policy To Tighten Money Supply
(Updates with more comments)
ROME (Dow Jones)--People's Bank of China Gov. Zhou Xiaochuan said Friday the bank wanted to use monetary policy to tighten money supply, but wouldn't elaborate on which instruments it planned to use, saying it wasn't "convenient" to do so.
The governor also said that credit controls currently in place in China were appropriate, but they weren't meant to be used for the longer term.
Zhou spoke at a joint press conference in Rome with European Central Bank President Jean-Claude Trichet and Bank of Italy Gov. Mario Draghi following a high-level seminar of East Asia-Pacific and euro-zone central banks.
Zhou noted that China had changed its monetary policy stance to "tight" from "prudent."
"That means that we are trying to use some monetary instruments to tighten the money supply," Zhou said.
"But which instrument we choose and we are going to choose...it's not convenient for me to elaborate here," he said.
Central banks can use their short-term policy interest rate, hike reserve requirements for local lenders, or allow their currencies to appreciate as tools to slow an overheating economy. China has used all three to various degrees.
Separately, Zhou also reiterated China's commitment to gradually expanding exchange-rate flexibility.
Earlier this week, a prominent government-linked economist called for the PBOC to ease its credit controls because companies, banks and property developers were finding it difficult to obtain funding.
Asked whether he thought such a move would be appropriate to help firms cope with economic slowdown, Zhou stressed that the current measures were temporary ones.
"I think the policy is right (appropriate) now, but this is not a medium-term policy," he said.
The governor was asked if he believed global inflation was a monetary phenomenon, and whether rising food and oil prices should be regarded as inflation or relative price shifts that will be absorbed elsewhere.
Zhou replied that while economic theory always teaches that inflation is a monetary phenomenon, it really depends on how one understands it.
"This (food- and oil-driven inflation) is a global phenomenon because we see that energy and food price inflation is in international markets and so it may have an impact to the whole globe," Zhou said.
"Monetary policy needs to deal with this kind of inflation," he added.
China set up a sovereign wealth fund - known as China Investment Corp. - last year, giving it authority to invest a small portion of the nation's $1.6 trillion in foreign reserves, the world's largest.
Quizzed whether the fund was investing in Italy, Zhou said he didn't know, but added: "Probably they are looking at quite a wide range of alternatives for their investment."
-By Natasha Brereton, Dow Jones Newswires; +44 20 7842 9254; natasha.brereton@dowjones.com
(END) Dow Jones Newswires
June 27, 2008 16:09 ET (20:09 GMT)
Copyright 2008 Dow Jones & Company, Inc.
(Updates with more comments)
ROME (Dow Jones)--People's Bank of China Gov. Zhou Xiaochuan said Friday the bank wanted to use monetary policy to tighten money supply, but wouldn't elaborate on which instruments it planned to use, saying it wasn't "convenient" to do so.
The governor also said that credit controls currently in place in China were appropriate, but they weren't meant to be used for the longer term.
Zhou spoke at a joint press conference in Rome with European Central Bank President Jean-Claude Trichet and Bank of Italy Gov. Mario Draghi following a high-level seminar of East Asia-Pacific and euro-zone central banks.
Zhou noted that China had changed its monetary policy stance to "tight" from "prudent."
"That means that we are trying to use some monetary instruments to tighten the money supply," Zhou said.
"But which instrument we choose and we are going to choose...it's not convenient for me to elaborate here," he said.
Central banks can use their short-term policy interest rate, hike reserve requirements for local lenders, or allow their currencies to appreciate as tools to slow an overheating economy. China has used all three to various degrees.
Separately, Zhou also reiterated China's commitment to gradually expanding exchange-rate flexibility.
Earlier this week, a prominent government-linked economist called for the PBOC to ease its credit controls because companies, banks and property developers were finding it difficult to obtain funding.
Asked whether he thought such a move would be appropriate to help firms cope with economic slowdown, Zhou stressed that the current measures were temporary ones.
"I think the policy is right (appropriate) now, but this is not a medium-term policy," he said.
The governor was asked if he believed global inflation was a monetary phenomenon, and whether rising food and oil prices should be regarded as inflation or relative price shifts that will be absorbed elsewhere.
Zhou replied that while economic theory always teaches that inflation is a monetary phenomenon, it really depends on how one understands it.
"This (food- and oil-driven inflation) is a global phenomenon because we see that energy and food price inflation is in international markets and so it may have an impact to the whole globe," Zhou said.
"Monetary policy needs to deal with this kind of inflation," he added.
China set up a sovereign wealth fund - known as China Investment Corp. - last year, giving it authority to invest a small portion of the nation's $1.6 trillion in foreign reserves, the world's largest.
Quizzed whether the fund was investing in Italy, Zhou said he didn't know, but added: "Probably they are looking at quite a wide range of alternatives for their investment."
-By Natasha Brereton, Dow Jones Newswires; +44 20 7842 9254; natasha.brereton@dowjones.com
(END) Dow Jones Newswires
June 27, 2008 16:09 ET (20:09 GMT)
Copyright 2008 Dow Jones & Company, Inc.
Di pos oleh Arbain Muhayat pada 22 December 2008