PBOC: China to use exchange rate to fight inflation

A central bank report released yesterday said China will increase efforts to fight inflation, including making use of the RMB exchange rate, state media reported. "(We will) strengthen the flexibility of the yuan’s exchange rate and utilize its role in optimizing resources to hold back rising prices," the report said. Inflation reached 8.5% in April, down from a 12-year high of 8.7% in February. China has set a full-year goal of 4.8% inflation, but policymakers and analysts have said the true number could be significantly higher. The use of the RMB exchange rate to fight inflation was questioned in April by Zhou Xiaochuan, governor of People’s Bank of China, who warned against "over-exaggeration" of the exchange rate’s function.