MNI BRIEF: Price, Financial Stability Connected-PBOC's Yi Gang

Price stability and financial stability have to be considered in tandem during times of stress, People's Bank of China Governor Yi Gang said in Washington on Saturday.

“In the normal situation you have to conduct monetary policy to conquer inflation, and consider financial stability secondarily. These two decisions could be separate," he said. "But in periods where you have real risk, especially when you might have systemic financial stability danger, then when you make monetary policy decisions you cannot totally separate [them]... For practical purposes especially in dangerous periods, you have to consider them jointly. Our mandate is price stability and financial stability.”

China's overall monetary policy strategy is to follow a middle way between excess and deficiency, Yi said, with the most favourable situation one where the real interest rate is slightly lower than the potential growth rate. (See MNI: China Q1 GDP Seen Up 4%, But Demand Weak Into H2-Advisors)