The People’s Bank of China (PBoC) remains concerned about inflationary risks and plans “to guide monetary conditions back to a normal level” following the two years of relatively easy liquidity, the Wall Street Journal reported. In its third-quarter monetary policy report published Tuesday, the PBoC explained that October’s interest-rate increase – the first in nearly three years – was aimed at “managing inflation expectations and consolidating the results of real-estate adjustment policies.” The rate hike came after concerted efforts to rein in property price growth as well as a gradual withdrawal of stimulus policies introduced to combat the downturn. The PBoC singled out rising labor and services costs in China as potential drivers of inflation expectations. It also noted that loose monetary policies in major economies will likely lead to large capital inflows. The US Federal Reserve is expected to announce a new program of bond purchases Wednesday as part of efforts to stimulate the economy.
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