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Nov. 17, 2019, 4:57 p.m. EST

China's central bank aims to curb inflation

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By MarketWatch

BEIJING--China's central bank said that it would take steps to contain the spread of consumer-price inflation, as Beijing continues efforts to stimulate both domestic demand and slowing economic growth while embroiled in a trade fight with the U.S.

As consumers are squeezed by higher costs--driven in part by surging pork prices due to outbreaks of African swine fever--policy makers need to respond to reduce the pressure, the People's Bank of China said in a quarterly report released Saturday. The virus, which is fatal to the animals but not a threat to humans, has wiped out about half of China's pig herds. Pork is a major staple of the average Chinese consumer's diet.

The PBOC said in its report Saturday it expects consumer inflation to ease gradually in the second half of next year. In addition, it said the country isn't facing "significant" pressure from its deflating producer prices. The central bank intends to maintain a prudent monetary policy aimed at stabilizing prices and managing inflation expectations, it said.

The remarks highlighted the conundrum Beijing faces as consumer and producer prices head in opposite directions. China's consumer-price index rose 3.8% in October from a year earlier--its highest level in nearly eight years--while the producer-price index dropped deeper into deflationary territory, falling 1.6% last month, previously released official data showed.

The central bank said industrial-price deflation, which reflects soft demand for factory products, is also a result of comparisons with higher base in the previous year. Industrial prices are expected to rebound in the coming months, the PBOC said.

The country's economic growth slowed to 6% in the third quarter, hitting the lower bound of the government's target range this year. In addition, readings of China's economic growth slowed across the board in October, with disappointing numbers in industrial output, household consumption and fixed-asset investment.

The PBOC doesn't plan to inject a massive amount of liquidity into the economy, and will work to keep both money supply and credit growth aligned with the growth of China's nominal gross domestic product, according to the report released Saturday. The central bank also said it would continue the overhaul of its interest-rate system, aimed in part at reducing financing costs for small private companies.

--Grace Zhu

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