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Appreciation of Yuan Keeps CPI Down

February 22, 2008 at 22:21 by Andriy Moraru

Chinese yuanThe People’s Bank of China released a monetary policy report for the fourth quarter of 2007 today. In this report, Chinese monetary authorities noted that the yuan’s appreciation really helps in fighting the national inflation.

Consumer prices index grew significantly last year, breaking a decade old records on inflation. Although, strong yuan helped to keep inflation from accelerating, CPI was still at a high level by the end of 2007 and the central bank expects that it will remain high for the first half of 2008.

The PBoC also stated that it will continue to regulate the monetary policy aiming for the stronger yuan in order to slow down the country’s inflation rate. They said also that the interest rate will be one of a primary tools of regulation, but it should be used carefully to keep the demand for money down.

In this report central bank also said that the continuous calls by the western countries to change China’s monetary policy along with the conjuncted trade threats can only hurt the relations between them and China and won’t do any good for the problems’ solving.

While there were no mentions of the bank’s precise targets on inflation or yuan’s Forex rate, experienced analysts understand that the whole report is crying out loudly that the yuan will continue its appreciation in 2008.

If you have any questions, comments, or opinions regarding the Chinese Yuan, feel free to post them using the commentary form below.

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