Monetary policy to stay alert on inflation

China will maintain its prudent monetary policy and maintain a cautious attitude toward further inflationary pressure amid global uncertainties and rising costs, according to a report by the People's Bank of China on Thursday.

"The government will make its monetary policy more targeted, flexible and forward-looking … while employing combined monetary tools such as open market operations and cutting banks' reserve requirement ratio to flexibly regulate banking liquidity," said the central bank's report on the country's monetary policy in the first quarter of this year.

However, the method of interest adjustment, which was mentioned in the report last year, did not appear this time.

"Although the prices are in an overall retreating trend, it's not yet stable … prices are sensitive to expanding demand and economic recovery," said the report.

The report came as the consumer price index of world's second-largest economy declined slightly to 3.4 percent in April, while first quarter GDP growth hit a three-year-low of 8.1 percent caused by sagging exports and domestic tightening efforts.

Falling prices in the second half of last year were a result of multiple measures adopted to ease inflation, but consumer prices may rebound as the situation improves, the report warned.

Prices of labor-intensive agricultural products, service products and resource products tend to surge on rising labor costs, and a volatile global commodity market has kept imported inflationary pressure in place, according to the report.

The central bank will optimize the credit structure to better serve the real economy, directing bank lending to support rural development, small- and micro-sized enterprises, projects designed for public welfare, and emerging industries of strategic importance, it said.