(Yicai Global) March 3 -- China’s central bank governor said interest rates and the reserve requirement ratio are at appropriate levels in response to questions about possible cuts.

“We believe that the current level of some major variables of our monetary policy are at relatively appropriate levels, and the level of actual interest rates is also relatively appropriate,” Yi Gang said at a press conference today.

The People's Bank of China has cut the RRR -- the share of cash banks must hold in reserve -- 14 times since 2018, with the average down to under 8 percent from about 15 percent, Yi noted.

RRR cuts remain an effective way for the PBOC to provide long-term liquidity to the economy, keeping liquidity at a reasonable and balanced level, he pointed out.

Yi said the precise and powerful implementation of prudent monetary policy will create a suitable monetary and financial environment for high-quality economic development. To that end, the top priority is to keep the Chinese yuan stable, which is necessary to maintain steady inflation and exchange rates, he said.

“Global inflation was at the highest in 40 years in 2022, with inflation in many European countries and the United States once at historical highs of around 10 percent,” according to Yi. “China's consumer price index growth was at a quite ideal level of 2 percent.”

The CPI average was also 2 percent in the five years between 2018 and 2022 and even in the past decade, with a high of 2.9 percent and a low of 0.9 percent, which is hard to achieve, Yi said.

“The Chinese yuan fell below 7 per US dollar three times in the past five years, but it managed to rise above 7 soon after each time, as resilience was enhanced by two-way fluctuations,” Yi noted.

Among currencies the redback is quite stable, and such a flexible and market-oriented exchange rate system has also played the role of an automatic stabilizer adjusting the economy and the balance of payments, he said.

China will use various monetary policy tools to keep liquidity reasonably ample and match the growth of broad money and social financing to that of nominal gross domestic product, Yi said. Moreover, the yuan will be kept stable at a reasonable and balanced level, he added.

Editor: Futura Costaglione