China’s annual consumer inflation slowed more sharply than expected to a seven-month low of 2.5 percent in December, easing market fears of monetary policy tightening although the central bank is tapping the brakes on bank liquidity.
Rising money market rates and bond yields indicate the People’s Bank of China (PBOC) is targeting bank liquidity conditions to reduce debt levels and contain credit growth, but there is little sign of a sharp turnaround in its policy stance.
The central bank has pledged to continue to maintain prudent monetary policy in 2014 and keep reasonable money and credit growth to support the real economy.
