Whether China further loosens monetary policy this year will depend “very much” on inflation, a central bank adviser said yesterday, adding that policymakers will be comfortable if inflation is not in a downtrend but stable between 1-2 per cent.

Qian Yingyi, a member of the central bank’s monetary policy committee, said authorities would monitor inflation in March and April to judge if deflationary pressures had worsened.

“Many analysts believe that deflationary pressures will continue. If that happens, I won’t be surprised if the central bank continues to reduce reserve requirements as well as interest rates,” Qian said in an interview.

“That is very much dependent on inflation,” he said.

He noted that a bounce in China’s consumer inflation in February may be a one-off blip on the back of the Lunar New Year holiday, and that authorities still needed assurance that inflation was not drifting lower.

“It’s not just the static level of inflation, it’s the direction,” said Qian, who is part of a 15-member monetary policy committee that is led by governor Zhou Xiaochuan. “If it’s stable between 1 and 2 per cent, it’s very, very comfortable. But above 2 per cent, there is a little bit of worry about inflation. Below 1 [per cent], there will be a bit of a worry about deflation,” he said.