BEIJING (Reuters) -China’s central bank said on Friday it would implement prudent monetary policy in a “precise and forceful manner” to support economic growth and employment, amid a slowdown in the economy’s recovery from the COVID pandemic.

The People’s Bank of China will continue to keep the yuan basically stable and guard against the risk of large exchange rate fluctuations, the PBOC said after the second-quarter meeting of its monetary policy committee.

The central bank said the current external environment was becoming more complex and trade and investment were slowing down, while inflation remained high.

The tightening effect of central bank policies in developed countries was continuing, and international financial market volatility has intensified, a PBOC statement said.

“The overall operation of the domestic economy has rebounded and improved, market demand has steadily recovered, and production has continued to expand. However, the endogenous driving force is still not strong, and demand is still insufficient,” it said.

The central bank will “overcome the difficulties …, step up macro-policy adjustments and implement prudent monetary policy in a precise and forceful manner”, it said.

The PBOC will make better use of its aggregate and structural policy tools to stabilise growth, employment, effectively support domestic demand, including consumption, and provide more forceful support for the real economy, it said.

Further, the bank will keep liquidity reasonably ample and maintain reasonable and steady credit growth, it said, reaffirming its goal of keeping money supply growth and total social financing largely in line with nominal economic growth.

The world’s second largest economy expanded 4.5% year-on-year in the first quarter, but momentum has faded sharply since.

Several major banks have cut their 2023 growth forecasts after May factory output and retail sales data missed forecasts, indicating Beijing would need to take further steps to shore up the post-COVID recovery.

Official data on Friday showed China’s factory activity declined in June for a third straight month, with weaknesses in other sectors deepening.

China’s cabinet this month met to discuss measures to boost economic growth. Earlier this month, China cut key lending benchmark rates to shore up economic activity.

During Friday’s meeting, the PBOC also stated that it would promote the stable and healthy development of the real estate market. It would also improve financial services in the area of bulk consumer goods and social services, and increase financial support for companies to help create more jobs.

(Reporting by Kevin Yao and Ella Cao in Beijing, Twinnie Siu in Hong Kong; editing by Christina Fincher and Mark Heinrich)

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