In an unusual move, the central bank announced yesterday that it would double the number of 364-day certificates of deposit (CDs) and negotiable certificates of deposit (NCDs) to be auctioned today from NT$50 billion (US$1.5 billion) to NT$100 billion.
A central bank official confirmed that the decision was made to help drain excess liquidity from the banking system.
"The central bank decided to double the amount because we have more time deposits maturing this month -- a total of NT$1.2 trillion -- than next month's NT$800 billion," the official said by telephone on condition of anonymity.
"We hope to absorb these funds [to drive up market rates] as the bank is most concerned about consumer prices," the official said.
For the first half of this year, the consumer price index (CPI) was up 0.61 percent, the core index up 0.71 percent and the wholesale price index (WPI) up 7.11 percent from the same period last year, the Directorate General of Budget, Accounting and Statistics (DGBAS) said earlier this month.
Although the increases in consumer prices have been mild, the central bank is worried that inflation might accelerate in the second half of the year.
The government's 10-year bonds fell following the central bank's announcement, while the New Taiwan dollar was unchanged at NT$32.821 against the greenback in forex trading.
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