The mainland's inflation rate will rise "slightly" this year, partly due to lagging effects, but Beijing is confident that it can keep price pressures under control, a senior central banker says, suggesting any dramatic tightening of monetary policy is unlikely.
A benign inflation outlook may provide room for Beijing to maintain its policies to bolster growth after the economy expanded by 7.8 per cent, the slowest rate since 1999.
The forecast may also ease concerns about price rises as policy makers consider reforms including further interest rate liberalisation and an overhaul of the income distribution system that may see a rise in wages for low-income earners.
Speaking on the sidelines of the opening session of the Chinese People's Political Consultative Conference, deputy central bank governor Yi Gang said the consumer price index might rise to about 3 per cent, compared with 2.6 per cent last year.
"We will face some inflationary pressures this year," Yi said. "But generally speaking, we are fully confident of keeping the prices under control."
He declined to comment on whether monetary policy should be used to curb a rise in housing prices. The State Council rolled out new directives on Friday, urging authorities to curb speculative activities through steps including strict implementation of a 20 per cent tax on earnings from property reselling.
Some analysts are worried that the curbs on home transactions may push up rental prices.
Many analysts expect inflation to stay tame for the most of the year, thanks to a good grain harvest. But some, including those from Standard Chartered Bank, said the CPI might rise in the fourth quarter because of a low comparison base.
The new leadership under Xi Jinping and Li Keqiang is widely expected to favour a stable economic environment during their first year in power. Partly reflecting this, sources told the South China Morning Post that Beijing would retain Zhou Xiaochuan as central bank chief for a year or two despite his turning 65 in January, the compulsory retirement age for officials of his ranking. Some analysts say he will also help deepen financial reforms.
Yi declined to comment on any personnel changes. "An outcome will be available in mid-March, when the National People's Congress ends," he said.
On social financing, a broader gauge of monetary supply that has been more closely monitored by economists, Yi indicated that the central bank might not announce a target. "We should have a grasp of the situation in our heart. But any target should be based on the market," he said.