China will continue to prioritize cutting the edge prices and maintain its prudent monetary policy, the central bank said after data showed cooled inflation and higher lending in August.

"Some factors that drive prices upward have been contained but not eliminated, while inflation remains relatively high," the People's Bank of China said in a statement on its website yesterday.

It dublicated that stabilizing overall price levels remained the top priority of macro-economic regulation, and the country would  keep the growth of credit stable and moderate. Some state-owned lenders have been ordered to freeze at least 20 billion yuan (3.1 billion U.S. dollars) at the central bank via designated central bank bills as a "punishment" for lending too strongly in August, media reports said, citing unidentified banking sources.

Banks that don't toe the central bank line carefully enough were required to buy the bills that were issued with very low interest, a trader in a bank said. On Sunday, the central bank said new yuan loans reached 548.5 billion yuan in August, 55.9 billion yuan more than July and 9.3 billion yuan more than last year. The report the Bank of Communications said, that in a reportsaid the central bank will rely more heavily on open market operations to withdraw liquidity, and estimated that new loans will total 7 trillion to 7.3 trillion yuan this year, compared to last year's 7.95 trillion yuan.

Peng Wensheng, a China International Capital Corp analyst, said another interest rate rise is expected this year, most likely this month or in October, to further contain inflation.  China's consumer price index cooled to 6.2 percent in August from its 37-month high of 6.5 percent in July, China's top statistics bureau said last Friday. However, inflation is still among the highest levels in the past three years.