Economy

Adviser sees looser policy in H2

By Fion Li (China Daily)
Updated: 2011-05-07 09:50

Hong Kong - China's monetary policy may shift to "less tightening" in the second half of this year.

That's because inflation may have peaked, either in April or this month, said Fan Gang, a former adviser to the central bank, the People's Bank of China.

Exchange-rate policies aren't likely to change "dramatically in the foreseeable future", according to Fan.

Related readings:  China still has space to tighten monetary policy further  Hu calls for reform of int'l monetary systems  China vows to continue prudent monetary policy  Property curbs may extend inland

The fastest expansion of any major economy and a jump in lending since the latter part of 2008 have stoked price risks and triggered two increases in benchmark borrowing costs this year. While the Philippines, Malaysia, India and Vietnam all raised interest rates this week, officials across Asia may recalibrate their inflation forecasts after commodity prices plunged on Thursday.

Fan said vegetable prices in China "have already stabilized", a key factor in reducing inflation. Consumer-price gains may peak this month or may have already done so in April, he said. He sees "less tightening than we had in the first half of the year".

Fan, formerly an academic member of the central bank's monetary policy committee, is a director of China's National Economic Research Institute.

The median forecast of 26 economists surveyed by Bloomberg News is for an April inflation rate of 5.2 percent, down from a 32-month high of 5.4 percent in March.

Premier Wen Jiabao aims to cool the property market and rein in consumer prices while sustaining growth amid signs of weakness in the global recovery. Oil traded near the lowest in almost two months in New York on Thursday, headed for the biggest weekly drop in a year after an unexpected increase in US jobless claims.

China's key one-year lending rate stands at 6.31 percent after four increases since mid-October.

Bloomberg News