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China Set to Be on ‘High Alert’ After Inflation Data Comes in Hotter Than Expected

“China should be on “high alert” over inflation after February’s figures exceeded forecasts, central bank Governor Zhou Xiaochuan said, signaling a heightened focus on controlling prices.

Monetary policy is “no longer relaxed” and is “relatively neutral” as demonstrated by a 13 percent target for money-supply growth that’s tighter than expansion in the last two years, Zhou, head of the People’s Bank of China, said at a press conference today during the annual gathering of China’s National People’s Congress.

Zhou’s comments add to signs that officials are tightening policies even as the recovery in the world’s second-biggest economy shows signs of weakness. While the central bank has leftinterest rates and lenders’ reserve requirements unchanged since July last year, the government this month intensified a campaign to control home prices.

“The central bank has always attached great importance to consumer prices,” Zhou said. “Therefore we will use monetary policy and other measures to hopefully stabilize prices and inflation expectations.”

China’s new leaders including Li Keqiang, set to become premier this week, inherit the task of sustaining a recovery from the slowest growth in 13 years while reining in asset prices and credit. February inflation, distorted by the weeklong Lunar New Year holiday, accelerated to a 10-month-high of 3.2 percent.

Tighter Policy…”

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