Five days after the central bank lifted its benchmark interest rates by an unexpected 0.25 percentage points, the nation's largest state-run lender yesterday decided to follow and raise its interest rates.
The Bank of Taiwan (台灣銀行) yesterday decided to raise its interest rate for certificate deposits by between 0.075 percentage points and 0.125 percentage points, effective today, the bank said in a statement.
The Bank of Taiwan also raised the interest rate it offers for time deposits by 0.1 percentage point.
A certificate of deposit (CD) is a type of "time deposit," because the account holder has agreed to keep the money in the account for a specified amount of time, anywhere from three months to six years.
While CD money removed before maturity is subject to a penalty, customers can withdraw savings from a financial institution simply by giving advance notice.
The bank's local counterparts are expected to follow suit.
Five other major state-run banks such as the Land Bank of Taiwan (土地銀行) and the Taiwan Cooperative Bank (合作金庫) as well as some private banks are expected to increase lending rates this week following the central bank's increase last week.
Central bank Governor Perng Fai-nan (彭淮南) told the legislature on Monday that major banks would announce their interest-rate increases on these two days to ease inflation worries.
Higher interest rates may dampen spending in Taiwan, while rising fuel costs leave consumers with less to spend.
The banking sector's ensuing interest-rate increase may have a greater impact on the nation's home-loan borrowers, since most of them hold adjustable-rate mortgages.
Under these agreements, the interest rate and monthly a-mounts borrowers must pay change in accordance with interest rate fluctuations.
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