Wed, Sep 07, 2005 - Page 10 News List

Central bank expected to hike rates soon


The nation's central bank yesterday said it decided to hold its quarterly meeting two weeks ahead of schedule, triggering speculation that the monetary policymaker would hike interest rates sooner than expected to combat inflation.

The bank said in a statement yesterday that it will hold its quarterly board meeting on Sep. 15 to review its monetary policy, without giving more details.

The central bank's move came one day after the government agency said Taiwan's consumer price index (CPI), which is used to gauge the risk of inflation, jumped 3.56 percent year-on-year last month on rising food and energy expenses. The jump resulted in a seven-year CPI high.

The annual increase well ex-ceeded the government's target of keeping CPI increases within two percent for this year.

Wu Chung-shu (吳中書), a research fellow at Academia Sinica, expected the central bank to further tighten its monetary policy, but said there is no need for the agency to take drastic measures, citing a stable core CPI, up 0.69 percent last month.

"We are concerned about inflation, but, for now, it's not necessary to hike interest rates sharply at the expense of economic growth," Wu said.

He expected the central bank to hike the nation's benchmark interest rates by 0.125 percentage points to fight inflation while maintaining GDP growth momentum.

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