China's central bank manager leaves much room for monetary adjustments needed in the context of trade

NUSA DUA, Indonesia (Reuters) – Chinese central bank governor Yi Gang said on Sunday that he still had a lot to do for an adjustment in interest rates and reserve requirement ratio (RRR) , the downside risks associated with trade tensions with the United States remain significant.

China is facing "huge uncertainties" due to the impact of tariffs and trade frictions and is seeking a "constructive solution" to current trade tensions, Yi said at a seminar organized in conjunction with the annual meetings of the International Monetary Fund and the World Bank. Bali island.

"We still have a lot of monetary policy instruments in terms of interest rate policy, RRR. We have plenty of room for adjustments, just in case we need it, "Yi said.

Beijing and Washington spoiled tariffs, and preparations for bilateral talks to resolve the dispute stalled, provoking a market outburst and further pressure on China's already weak economy.

The head of the central bank said the growing trade tensions with the United States had led to negative market expectations and created uncertainties.

"I think trade risks related to trade tensions are important," he said. "Huge uncertainties (are) before us."

However, Yi said China 's economic growth would still reach its annual target of around 6.5% with a possibility of overtaking, adding that he was comfortable with current inflation levels.

China has undergone four RRR cuts this year, reducing the amount of cash that banks must deposit at the central bank and releasing billions of new cash into the market.

When asked if the excess funding would fuel debt fears, Mr Yi said that he felt that the amount of liquidity injected into the market was appropriate to stabilize the debt.

China's monetary position remains essentially neutral, he said.

"The interest rate level (reference) is appropriate. I would say that the level of interest rates is more or less comfortable, "he said.

Yi said that he expected China's consumer price inflation to be around 2% for the year, with output price inflation falling from 3% to 4%.

China's current account could also become positive this year with "a little bit" surplus, but it would still be less than 1 percent of gross domestic product, he said.