Ms. HU: Exchange rate adjustment helps ease the pressure of imported inflation

Every reporter Tianwen from the Beijing Central Bank, Hu Xiaolian, said in a signed article yesterday (July 26) that the increasing foreign-exchange holdings in recent years have affected the effectiveness of China's central bank's monetary policy, and that a more flexible exchange rate regime has helped to curb inflation and asset bubbles. Hu's signature article is her third post in China, entitled "Exchange rate reform and effectiveness of monetary policy". She said that, combined with China's special stage of development, monetary policy needs to balance the four macroeconomic objectives of price stability, economic growth, full employment and balance of payments. The primary responsibility is to stabilize the currency and prevent the risk of high inflation.　　Ms. Hu said a modest appreciation of the local currency would help ease "input" inflationary pressures at a time of high inflationary pressures. Effect of foreign exchange appropriation on the effectiveness of monetary policy Hu pointed out that China's monetary policy in recent years, the autonomy and effectiveness of foreign exchange accounted for the rapid growth of the serious challenge. After China's accession to the World Trade Organization in 2001, the current account surplus has widened significantly, becoming the main source of balance of payments surplus.　　Under the premise of keeping the exchange rate level relatively fixed, the continued growth of the balance of payments surplus and the constant inflow of foreign exchange lead to the passive delivery of the basic currency by the people's Bank in the form of foreign exchange appropriation. From the perspective of the source structure of China's basic currency in recent years, the ratio of bank loans to financial institutions is declining, and foreign exchange account is the main channel of the basic money supply. The autonomy of monetary policy is affected, and the money supply presents a strong endogenous characteristic.　　In recent years, although China's CPI basically stable in the lower level, but the broad price level, such as PPI (producer price index), real estate and other asset prices have increased significantly. In recent years, the People's Bank of China and the domestic and foreign economic and financial situation and foreign exchange flow changes, to strengthen the banking system liquidity management as the main content of monetary policy regulation, with the use of open market operations and deposit reserves and other hedging tools, vigorously hedging the growth of foreign exchange accounts, recycling the excess liquidity of But the pressure of excessive liquidity level is difficult to fundamentally alleviate.　　In addition, with the increase of the liquidity of the banking system, the frequent adjustment of the central bank's bills and the deposit reserve have some influence on the operating efficiency of the commercial banks and even the financial system, and the hedging cost of the central bank is increasing gradually. For the central bank, Ms. Hu said the primary responsibility was to stabilize the currency and prevent the risk of high inflation.　　Monetary policy is the most important and effective macroeconomic policy in managing inflation, and should continuously enhance the effectiveness of monetary policy and ensure the achievement of price stability to promote economic growth. Appreciation helps ease the "input" inflation. From our current reality, a more flexible exchange rate regime helps to curb inflation and asset bubbles. For example, when inflationary pressures are high, the local currency appreciates moderately, and imports are relatively cheap. Exchange rate adjustments will help ease the ' input ' inflationary pressures.　　"Ms. Hu said in the article. Ms. Hu believes thatThe flexibility of exchange rates also helps to improve the transmission mechanism of monetary policy. From the practice since 2005, according to the "initiative, progressive, controllable" principle of the RMB exchange rate formation mechanism reform, so that enterprises, commercial banks and other micro-subjects to actively adapt to exchange rate floating awareness of the increase in response to market changes in flexibility and ability to improve.　　Money market, foreign exchange market further development, the depth and breadth of markets have been greatly improved.　　In addition, to achieve economic restructuring and the transformation of economic growth patterns, Hu said that appropriate through the exchange rate and other price means to adjust trade imbalance and balance of payments imbalance is conducive to easing foreign exchange inflows and reserve accumulation of excessive pressure to achieve a more stable economic, sustainable development and the smooth and orderly growth of the money supply. She also said that a flexible exchange rate regime would help to respond directly to various external economic shocks and help to strengthen a country's ability to respond to external shocks and macroeconomic "resilience".　　Many international financial crises since the 1990s have shown that a rigid exchange rate regime is susceptible to speculative attacks and may trigger a so-called "self-fulfilling" currency crisis. News Link National Information Center: RMB value does not exist a substantial rise in the foundation of every journalist he kirin from the Shanghai State Information Center in Monday issued a report that should insist on promoting exchange rate reform and maintain the basic stability of the renminbi exchange rate is not the basis for a sharp rise in the value of the renminbi, but the government still　　Prevent massive inflows of speculative capital. The renminbi rose slightly against the dollar in Monday.　　Industry insiders said this was due to the strength of following the euro in Friday, and the central bank in Monday slightly higher the renminbi against the U.S. dollar middle price.　　Data show that the inquiry market, Beijing time Monday (July 26) 17:30, the United States dollar against the RMB 6.7795 yuan, the last Friday (July 23) closing price of RMB 6.7803 yuan, the exchange rate plate fluctuation range of RMB 6.7770~6.7816 yuan. This Monday, the central bank authorized the Exchange trading Center announced, July 26, 2010 Interbank Market exchange rate of the dollar and other trading currencies of the median price: 1 U.S. dollars against the renminbi 6.7778 yuan, 1 euros against the renminbi 8.7576 yuan, 100 yen against the renminbi 7.7350 Yuan, 1 Hong Kong dollar to 0.87256 yuan, 1 pounds against the renminbi 10.4551 yuan.　　In Friday, 1 dollars was 6.7790 yuan.　　A foreign trader in Shanghai told the Daily economic news that in view of the trend of the dollar in the global foreign exchange market in Friday, Monday dollar/renminbi intermediate price level was in line with market expectations. "As in the domestic and international markets, the response to the European Bank's stress test results has been muted," he said.　　"In Friday, the results of the stress tests, including 91 banks in 20 European countries, were revealed and only 7 failed to pass the stress tests," the company said. The trader added that the dollar/renminbi could continue to fluctuate within a narrow range for some time to come. "The current domestic market is notThere are clear guidelines for trading, and management may have to make further adjustments to the exchange rate policy by the middle of August, when more economic data are released.　　"On the offshore market, Beijing time Monday 17:30, overseas non-principal delivery forward foreign exchange (NDF) Market dollar/renminbi one-year period slightly reduced to RMB 6.6902/RMB 6.6952, the last Friday, the end of the RMB 6.6950/6.7000 yuan." Last week, the traders said, there was less forward trading in USD/RMB without principal delivery in the offshore market. "The market is waiting for more details on the expansion of Hong Kong's renminbi trading. ”