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China could go for more monetary easing policies: official

Press Trust of India  |  Beijing 

China could still go for more monetary easing policies, especially Reserve Requirement Ratio (RRR) cuts for the banks to improve lending to halt the slowdown of the world's second largest economy, a top central bank official said today.

Chen Yulu, member of the Monetary Policy Committee of the People's Bank of China, said that there was plenty of room for more RRR cuts, citing continuing deflationary risks as an influencing factor.

Consumer Price Index, the main gauge of inflation, averaged 1.2 per cent year on year in the first three months (Q1) of 2015, the lowest since the fourth quarter of 2009.

Producer prices, a measure of costs for goods at the factory gate, also dropped 5.6 per cent year on year, data from the National Bureau of Statistics showed.

Ongoing deflationary risks indicate a high possibility of more loosening measures in the future, Chen said.

RRR remains high at 18.5 per cent, presenting enough room for further cuts.

The central bank lowered the RRR cut by one percentage point three days ago in bid to increasing funding for private sector investment to spur growth as the second largest economy continued to slow down.

Given the persistent downward pressure on the economy, with growth slowing to 7 per cent in Q1, the lowest rate since 2009, Chen expects more RRR cuts in the future. China has already affected two RRR cuts this year.

China's gross domestic product growth slowed to 7 per cent in the first quarter from 7.3 per cent in the final three months of last year, marking the worst result in six years and indicating continuing downward pressure on the economy.

Last year, the economy registered 7.4 per cent, lowest in 24 years.

Though the growth in the first quarter met the official target of around 7 per cent for 2015, the slowdown in several areas, including industrial output and retail sales, has caused concern.

First Published: Wed, April 22 2015. 15:48 IST
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