Monetary policy to remain prudent: PBOC

BEIJING - China´s central bank said Sunday it will maintain a prudent monetary policy as the country faces pressure in supporting growth and containing inflation.

The remarks, made by an official with the People´s Bank of China (PBOC), was quoted in a PBOC press release a day after the central bank announced a reserve requirement ratio (RRR) cut to ease a liquidity shortage and secure growth amid weak external demand.

"Both the pressure of growth moderation and that of price rises exist at the same time. The overall tone of the monetary policy will stay prudent," Jin Qi, assistant to the PBOC governor, was quoted as saying during a meeting held on Thursday and Friday.

The current international economic situation remains complicated and grim, while China´s economic development is still not balanced, coordinated or sustainable enough, said Jin.

The PBOC on Saturday announced a cut in the amount of cash that lenders must set aside as reserves, the second of its kind in three months.

The RRR will drop by 50 basis points to 20.5 percent for large commercial banks and 17 percent for mid- and small-sized banks, effective on February 24, the PBOC said.

The central bank lowered the RRR in December by 50 basis points after hiking the RRR six times last year to cool inflation. It was the first cut since December 2008.

China´s economy expanded by 9.2 percent year-on-year in 2011, with its GDP growth rate dropping to a 10-quarter low of 8.9 percent in the fourth quarter.

The consumer price index, a main gauge of inflation, rebounded to 4.5 percent in January after easing to a 15-month low of 4.1 percent in December. But it still grew an annualized 5.4 percent in 2011, above the government´s full-year control target of 4 percent.