PBOC Says China Shouldn’t Be ’Blindly Optimistic’ on Inflation

China can’t be “blindly optimistic” about its inflation outlook at a time when uncertainties remain in areas such as property and farm produce prices, the country’s central bank said.

China will continue to pursue a prudent monetary policy to keep prices stable, the People’s Bank of China said in its first-quarter monetary policy implementation report. The bank will also further push forward interest-rate liberalization and reform of mechanisms for forming the yuan’s exchange rate, according to the report.

The central bank’s comments came after China’s statistics bureau reported today that the consumer price index rose 2.4 percent in April, compared with a median forecast of 2.3 percent in a Bloomberg News survey.

Moves to loosen government control over utilities and resources may also lead to higher inflation later in the year, the central bank said in the report. Food prices rose 4 percent last month from a year earlier, compared with 2.7 percent the previous month, with fresh-vegetable prices helping drive the pickup in broader inflation from March’s 2.1 percent pace, according to the statistics bureau.

Surging capital inflows into the country also complicated the central bank’s task in guarding against any flare-up in inflation, according to the report. China’s monetary-market rate snapped a three-day drop as the central bank sold bills today for the first time since 2011, draining cash from the financial system as accelerating yuan gains spur capital inflows.

To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at frong2@bloomberg.net

To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net

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