The central bank announced plans yesterday to auction off NT$100 billion (US$3 billion) in 364-day certificates of deposit (CDs) next Friday to help drain liquidity from the banking system.
There will be NT$320 billion in time deposits maturing next week and the monetary policymaker may decide to auction more CDs soon to avoid excess liquidity in the system dragging down market rates, a central bank official said on condition of anonymity.
The central bank sees keeping consumer prices as stable as possible as its priority task. It announced on July 19 that it would double the amount of 364-day CDs to be auctioned the following day from NT$50 billion to NT$100 billion.
Last month, NT$1.2 trillion in time deposits matured.
The bank said the decision was made to absorb the released funds in order to drive up market rates as it is concerned about the possible inflationary risks.
For the first half of this year, the consumer price index was up 0.61 percent, while the wholesale price index soared 7.11 percent from the same period last year, the Directorate General of Budget, Accounting and Statistics said last month.
The gap between the two indices has forced manufacturers to pass on increased costs to consumers. This has led to a series of price hikes, most notably on fresh milk, milk-related foodstuffs and flour recently.