Central bank to discuss rate increase next month

The central bank is expected to discuss whether to raise interest rates next month, a bank policy-maker said yesterday after a rate hike announced by the US Federal Reserve.

The Fed lifted its benchmark overnight lending rate by 0.25 percentage point to 1.5 percent, and also restated its pledge to raise borrowing costs at a ``measured'' pace to suppress inflation without choking off growth.

Deputy Governor Hsu Yi-hsiung (徐義雄) said the bank will maintain its key interest rates for the time being but will closely watch the global economic situation. The bank is considering discussing the interest rate issue at its quarterly board and supervisor meeting next month, he added.

Apart from macroeconomic developments at home and abroad, the bank will also pay attention to changes in consumer prices and financial markets, he said.

The bank said it will maintain its rediscount rate -- charged to commercial lenders for 10-day loans -- at 1.375 percent. It also decided to maintain the rate on accommodation with collateral at 1.75 percent and short-term accommodation rate at 3.625 percent.

Taiwan has in the past closely followed US interest rate adjustments and cut the benchmark interest rate to a record-low 1.375 percent in 15 reductions between December 2000 and June last year.

But Governor Perng Fai-nan (彭淮南) said in May that the bank might not follow the Fed if it were to raise interest rates, since "monetary policy decisions should be country-specific and cross-country synchronization of monetary policy is not necessarily desirable."

After its quarterly board meeting in June, the bank said it would adjust its monetary policy whenever necessary. It recently raised its forecast for consumer price index growth sharply to 1.33 percent.