Bank of Taiwan to hike interest rates

The state-owned Bank of Taiwan (臺灣銀行) said it would raise interest rates next week, after the central bank on Thursday announced that it was hiking its benchmark interest rates.

The Bank of Taiwan will increase its interest rate on both time deposits and time savings deposits by a range between 0.06 and 0.08 percentage points, beginning on Wednesday, it said in a statement posted on its Web site.

It said the increase was meant to help it cope with the central bank's latest move and to reflect the funding conditions in the market.

Taiwan Cooperative Bank (合作金庫) followed suit last night, and other state-run or state-controlled banks such as Land Bank of Taiwan (土地銀行), Chang Hwa Bank (彰化銀行), First Commercial Bank (第一銀行), Hua Nan Commercial Bank (華南銀行) are expected to raise their interest rates next week, after the Mid-Autumn Festival holidays.

The central bank's latest rate hike, which took effect yesterday, was the 13th straight quarterly increase the bank has imposed since October 2004. It has raised rates by a total of 1.875 percentage points since October 2004 to curb inflationary pressure.

The discount rate charged to commercial lenders is now 3.25 percent, up from 3.125 percent, while the rates on accommodations with collateral and without collateral will each rise by 0.125 percentage points to 3.625 percent and 5.5 percent.

To reflect the central bank's latest rate adjustment, the fixed rates on negotiable certificates of deposit (NCD) and certificates of deposit (CD) sold by the central bank yesterday rose by between 0.06 and 0.08 percentage points.

The central bank yesterday sold NT$119.8 billion (US$3.64 billion) in NCDs and CDs in an open market operation, it said in a release on its Web site.

The bank sold NT$38.9 billion in 30-day CDs and NCDs at a fixed rate of 1.98 percentage points, up from 1.92 percent previously.

It also offered NT$40.5 billion in 91-day CDs and NCDs at 2.06 percent, up from the previous 1.99 percent, in addition to an offer of NT$40.4 billion in 182-day CDs and NCDs at 2.15 percent, up from 2.07 percent, the release showed.

The central bank said a total of NT$869.6 billion in CDs and NCDs had matured between Sept. 1 and Sept. 21, which it has replaced with NT$835.2 billion of new short-term debt in order to drain excess funds from the nation's money market.