Reuters reported that China central bank pledged on Monday to keep its prudent policy to wrestle inflation under control, but signaled some concerns over slowing growth by stressing policy stability.

The central bank said in a statement to summarize its monetary policy meeting for the second quarter that "China's economy continues to grow at a stable and relatively fast pace, but inflation pressures remain high."

The People's Bank of China said it will use various tools to manage liquidity and keep the overall money supply at a reasonable level. But the central bank also stressed the importance of stability and flexibility in implementing its prudent policy and signaling its concerns about the slowing economy.

Mr Tang Jianwei economist at Bank of Communications in Shanghai said "The central bank may reduce the intensity and frequency of policy tightening to avoid hurting the real economy, given its policy efforts have gained some traction."

He said that "However, considering that inflation pressures are still high, the central bank is likely to relax policy. It may wait and see."

Mr Tang still expects another interest rate rise later this month.

The central bank has raised interest rates four times and reserve requirement ratios six times this year to tame stubbornly high inflation. But price pressures remain elevated with annual inflation widely expected to quicken to around 6% in June after hitting a 34 month high of 5.5% in May.

China factory sector grew at its slowest pace in 28 months in June as new orders expanded less quickly, pointing to slowing economic growth under the weight of credit curbs and weaker global demand.

(Sourced from Reuters)