BEIJING, Feb 6 (Reuters) - China needs to pay special attention to consumer prices with controlling inflation a priority, the central bank said on Wednesday in a turnaround from its previous focus of supporting economic growth.
In its fourth-quarter monetary policy report, the People's Bank of China noted the rebounding Chinese economy was still unstable but said policy would be prudent, its customary definition even as it cuts or raises interest rates.
But the language in the report is a change from its last, where it promised to prioritise supporting the economy above other needs. The previous report was released in November.
The central bank's renewed emphasis on inflation would affirm widespread investor belief that the world's second-biggest economy is recovering from its worst annual downturn in 13 years, and that price pressures could accelerate.
'We should pay special attention to the effects of changing expectations on future prices,' the central bank said.
'As the economy transits into another stage of growth, economic controls need to always emphasise containing inflation risks.'
A near two-year economic cooldown in China has pushed inflation to benign levels of under 3 percent. But growth is rebounding on higher state investment and resilient consumer spending, and price pressures are expected to quicken.
A buoyant house market, where prices are again setting or climbing towards record highs, is also fanning inflation.
Rising wages in the services sector and for some labour-intensive farm industries, and super-loose monetary policies abroad are also fuelling inflation.
Without commenting on the interest rate outlook, it said it would use a range of policy tools to alter market liquidity including open market operations, reserve requirement ratio, lending to banks, and buying or selling discounted bills from banks.
The central bank had not included the use of loans and discounted bills as possible policy tools in its previous policy reports in the past year.
China is set to release its monthly trade and inflation data on Friday and economists expect the figures to point to a modest recovery, after surveys of Chinese factories earlier this month showed manufacturers had more business in January.
The Chinese economy ended seven straight quarters of slowing growth in the fourth quarter by growing 7.9 percent. But it still had its worst performance since 1999 on a yearly basis, growing 7.8 percent in 2012.
Analysts expect the economy to grow 8.1 percent this year.
(Reporting by Shao Xiaoyi and Koh Gui Qing; Editing by Nick Macfie) Keywords: CHINA CBANK/POLICY
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