Zhou Xiaochuan, the governor of the People's Bank of China (PBoC), on March 14 stood firm on the central bank's interest rate strategy despite inflation data published the previous week triggering alarm in some quarters.

Speaking to reporters following the conclusion of the National People's Congress, the country's annual legislative session, Zhou said the February consumer price index had been "a bit higher than our forecasts, but not much higher". "We can still act according to our plans," he added, signalling that the central bank would not be panicked into an impulsive rate hike.

However, at the same legislative session Wen Jiabao, the Chinese premier, said conquering inflation was a priority for the government. "If there is inflation plus unfair income distribution and corruption, it will be strong enough to affect our social stability and even the stability of state power," he said, according to the Financial Times. In light of this, it would be crucial to maintain "appropriate and sufficient" liquidity while keeping "interest rates at a reasonable level," Wen said.

Inflation figures released by the National Bureau of Statistics on March 11 showed that consumer prices, driven in particular by a spike in the cost of food, had gained 2.7% in February, 0.2 percentage points above the consensus forecast. Analysts were quick to point out that although the excess was small, the presence of a lag meant that there were significant upside risks to inflation in the months coming ahead.

The Chinese central bank has tread lightly on the issue of reining in fiscal stimulus measures to date, with repeated insistences that two 50 basis point-hikes in consecutive months to its reserve requirement ratio, which affects how much banks have to lend, were not to be construed as policy tightening.