China likely to ease again if inflation falls

(Chinadaily) China is likely to cut interest rates orreserve requirements again if consumer inflation drifts below 1 percent, amember of the central bank's monetary policy committee said, as he ruled outmore support for the sagging Chinese property market.

Qian Yingyi said policymakers still neededto monitor the inflation data for March and April to judge if deflationpressures were deepening in the world's second-biggest economy.

Having seen China lower interest rate twicesince November, and also cut the level of cash banks must hold as reserves lastmonth, most investors assume that China will further loosen monetary policy incoming months to buoy an economy that is on course for its worst year in aquarter of a century.

In an interview with Reuters on Wednesday,Qian, who is also an economics professor at China's Tsinghua University, saidany policy move "is very much dependent on inflation".

"Many analysts believe thatdeflationary pressures will continue. If that happens, I won't be surprised ifthe central bank continues to reduce reserve requirements as well as interestrates," he said.

China's annual rate of consumer inflationquickened to 1.4 percent in February from a 5-year low of 0.8 percent theprevious month, but Qian said the bounce could be a one-off blip as a result ofthe Lunar New Year holiday.

"It's not just the static level ofinflation, it's the direction," said Qian, who is part of a 15-membermonetary policy committee led by Governor Zhou Xiaochuan.

He said authorities were comfortable withinflation running between 1-2 percent in current circumstances, compared withthe government's 2015 inflation target of 3 percent.

"If it's stable between 1 and 2percent, it's very, very comfortable. But above 2 percent, there is a littlebit of worry about inflation. Below 1 (percent), there will be bit of a worryabout deflation," he said.