皇冠体育app

(Agencies)
Updated: 2008-02-14 10:27

皇冠体育app needs to raise interest rates to curb inflation and let the yuan rise gradually, Fan Gang, an adviser to the central bank, said in remarks published on Thursday.

Steps by Washington to boost the US economy would increase pressure on the yuan to rise and may boost hot money inflows into 皇冠体育app, Fan told the People's Daily.

He said 皇冠体育app's macroeconomic controls should be responsive to changing conditions both at home and abroad. As such, a tight monetary policy was still needed to curb inflation and prevent the economy from overheating.

"Currently our country's interest rates are relatively low and consumer prices are relatively high. Some short-term deposit rates are still negative in real terms. From this perspective, there is still pressure in the economy to raise interest rates," Fan said.

The central bank last year raised interest rates six times and increased banks' reserve requirements 10 times.

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But deposit rates still lag inflation, which was 6.5 percent in December. Economists expect the rate in January to have surpassed the 11-year high of 6.9 percent hit in November.

However, Fan said 皇冠体育app also needed to take account of recent deep cuts in US interest rates; otherwise, more international speculative money would flow into 皇冠体育app.

The constant weakening of the dollar made it impossible to carry out a one-off revaluation of the yuan to a balanced level, Fan said, adding that big swings in the value of the currency would entail serious risks for 皇冠体育app's financial system.

"Personally, I prefer letting the yuan rise in a gradual and controllable manner in line with growth of the economy," he said.

Fan said the central bank would continue to use reserve requirements, interest rates, the exchange rate, open market operations and window guidance to achieve its monetary targets. But he did not elaborate.

"Policy makers need to make a proper decision in light of varying circumstances whether to use quantitative measures more frequently and rely less on raising interest rates," he said.

Fan also said the US subprime crisis was far from having played out and might eventually ripple through 皇冠体育app.

However, he said US stimulus policies would help to avoid a recession and 皇冠体育app could cushion the impact of a slowdown by exporting more to other parts of the world such as Asia-Pacific nations and oil-producing countries.