China's central bank does not want to "be seen to be responsible for fuelling another bubble".
China's
policymakers have been given more room to boost stimulus measures after
the country's inflation rate dipped in September.
Consumer prices rose 1.9% from a year earlier. That was down from 2% growth in August. There have been calls for Beijing to ease its monetary policy to boost domestic demand and spur growth amid a global economic slowdown.
China's economic growth slowed to a three-year low in the second quarter.
"This inflation picture remains supportive for further policy easing to support the growth recovery which is still the top priority for now," said Sun Junwie, an economist with HSBC in Beijing.
Domestic boost China's economy has been hurt by falling demand for its exports and a slowdown in investment in the country.
Demand for its exports has been hit by continuing economic problems in key markets such as the US and Europe.
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Wang Jun CCIEEWe think it's necessary to cut interest rates and reserve ratio requirement in [the] fourth quarter to ensure sound economic growth in 2013”
Despite the fact that exports
rose by 9.9% in September from a year earlier, which was more than had
been expected, the export sector's growth continues to remain under
pressure.
As a result, China has been keen to boost its domestic consumption in a bid to rebalance its economy and sustain growth.It has lowered the reserve ratio requirement, the amount of money banks must keep in their reserves, three times in the past few months, in a bid to boost lending and spur demand.
It has also cut interest rates twice since June this year, to bring down the cost of borrowing for consumers and businesses.
On the investment front, Beijing has approved infrastructure projects worth more than $150bn (£94bn) to try to spur a fresh wave of economic development.
Analysts said policymakers will have to introduce further measures in order to sustain long term growth.
"We think it's necessary to cut interest rates and reserve ratio requirement in [the] fourth quarter to ensure sound economic growth in 2013," said Wang Jun, an economist with the China Centre for International Educational Exchanges (CCIEE) in Beijing.