Bank of Taiwan set to raise interest rates tomorrow

State-owned Bank of Taiwan (台灣銀行) said it will raise interest rates tomorrow, following in the foot-steps of the central bank which increased official interest rates last week.

The Bank of Taiwan will increase the interest rate on both time deposits and time savings deposits by 0.03 percentage points, beginning tomorrow, to cope with the central bank's latest move and to reflect the funding conditions of the market, the bank said on its Web site.

Under the new adjustment, the rate for one-year time deposits will rise to 2.23 percent from 2.20 percent, and the rate for one-year time savings will be hiked to 2.26 percent from 2.23 percent, the bank said.

But the bank will lower its base rate by 0.929 percentage points to 3.756 percent after taking into account the interests of customers following its expected merger with Central Trust of China (中央信託局), the bank said.

The state-controlled Taiwan Cooperative Bank (合作金庫) also announced over the weekend that it would raise interest rates by 0.03 percentage points, taking effect tomorrow.

Other major commercial banks, including Chang Hwa Bank (彰化銀行) and First Commercial Bank (第一銀行), are expected to follow the lead of Bank of Taiwan to raise their interest rates later this week.

The central bank last week raised its benchmark interest rate for the 10th straight quarter by 0.125 percentage points. The rediscount rate charged to commercial lenders is now 2.75 percent.

The central bank has raised interest rates a total of 1.375 percentage points since September 2004 to curb inflationary pressure.

Industry has complained about the effect of the rate increases on the nation's competitiveness.