IMF Rato: China Should Let Market Set Yuan's Value

China should allow the market to determine the value of its currency, giving policymakers greater scope to use interest rates to cool its economy, International Monetary Fund chief Rodrigo Rato said.

With overheating a clear risk for China, and an increase in inflation also a serious concern, the country's monetary policy needs to concentrate on keeping prices stable rather than the value of the yuan, Rato told a press conference. "We believe that right now one of the most important elements of Chinese economic policy would be to let monetary policy play a bigger role in both the problem of overheating and inflationary pressures," he said. "That requires that the currency's value move more freely in relationship to market forces." China's economy expanded 11.9% in the second quarter from a year earlier, putting it on pace for its fastest annual growth in more than a decade. Consumer price inflation rose 4.4% in June, well above the government's 3% target.