China’s Monetary Policy Dilemma

From Economic Observer Online:

China’s central bank has found itself stuck in a dilemma as to what to do in regard to current monetary policy.

Last week, Caijing, a well-known financial magazine, reported that the People’s Bank of China (PBoC) would soon switch to making preventing inflation and controlling the rise of domestic asset prices its top priority, while, at the same time, continuing to carry out a moderately loose monetary policy.

As of press time, the central bank had yet to respond to the Caijing report. However, a source from the central bank revealed to the Economic Observer that the bank’s policy approach over the next half year was unlikely to reflect that outlined in the the financial magazine’s report.

In fact, the prevailing market expectation is that over the next half year, the central bank will pay attention to the rise in domestic asset prices and inflation expectation, and it has already released several signals that it plans to fine tune its monetary policy.

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