Mon, Dec 05, 2011 - Page 11 News List

Interest rates will likely stay unchanged: analysts

Staff Writer, with CNA

Local analysts have said they do not expect any change in Taiwan’s interest rate despite some of the world’s central banks making moves to tackle the debt crisis in Europe.

China announced on Wednesday that it was cutting its bank reserve requirement ratio by 50 basis points for the first time since 2008, not long after several central banks in the West announced measures to boost liquidity to weather the impact of the debt crisis in the eurozone.

The US, Canada, Japan, the UK and Switzerland, as well as the European Central Bank (ECB), last week announced lower borrowing costs for banks seeking to secure US dollar loans.

Taiwan’s central bank will hold its fourth quarterly policymaking meeting of this year on Dec. 29.

Taiwan Research Institute (台灣綜合研究院) president Wu Tsai-yi (吳再益) said that “there is no room for a rate hike,” as the Taiwan dollar is now under pressure to rise.

If interest rates were raised, it would have an impact on economic growth, he said.

He added that private investment recorded negative growth this year, although Taiwan has had relatively low interest rates in recent years, and that the debt woes in Europe might continue to affect exports for a year or two.

Keeping the current interest rates unchanged would be beneficial for private investment in the coming year, he said.

In addition, Cheng Cheng-mount (鄭貞茂), a vice president of Citibank Taiwan Ltd (台灣花旗), said there is a bigger possibility that the central bank will maintain its current rates at this month’s meeting.

Asked if an interest rate reduction can be expected, he said that “there is no need to lower the rates” because Taiwan’s economy is not that bad.

However, Liang Kuo-yuan (梁國源), president of the Taipei-based Polaris Research Institute (寶華綜合經濟研究院), predicted lower interest rates.

Because the global economic outlook remains uncertain, it is possible that the government will attempt to boost the economy through monetary policies, he said.

At the third quarterly meeting in late September, the central bank decided to leave its key interest rates unchanged.

The discount rate at that time stood at 1.875 percent, the rate on accommodations with collateral at 2.25 percent and the rate on accommodations without collateral at 4.125 percent.

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