Fri, Dec 27, 2013 - Page 13 News List

Central bank maintains policy rates

CAUTION:Perng Fai-nan expressed concern over banks’ lending for industrial zone projects, saying it could raise banks’ financial risks and spark real-estate speculation

By Amy Su  /  Staff reporter

The central bank yesterday said it would continue a strategy to persuade local lenders to be more cautious on mortgage lending, while keeping the nation’s benchmark interest rates unchanged for the 10th straight quarter.

The central bank met local market expectations by keeping its discount rate unchanged at 1.875 percent, with the collateralized and unsecured loan rates at 2.25 percent and 4.125 percent respectively, citing the current mild pickup in the domestic economy and slowing pressure on consumer prices.

However, bank Governor Perng Fai-nan (彭淮南) voiced concern that some banks may have been too reckless in extending loans for industrial zone projects, which may raise those banks’ financial risks and spark speculation in the housing market.

Perng said the central bank has asked the Bank of Taiwan (台灣銀行) and seven other domestic banks that have a large exposure to mortgage lending to be more careful in evaluating such projects.

The bank will also continue its scrutiny of local banks, carefully monitoring their risk-control measures, Perng added.

Asked about monetary policy, Perng said that even though consumer prices were steady, the central bank has limited room to raise interest rates if the economic and manufacturing industries continue to lag behind expectations.

“The bank [currently] maintains a moderately easy monetary policy,” Perng told a press conference.

The central bank’s decision to keep its M2 money supply growth target for next year unchanged is an indication that the bank would maintain its accommodative monetary policy stance, as well as interbank liquidity conditions, at existing levels.

The target growth zone for M2 is set between 2.5 percent and 6.5 percent for next year, central bank statistics showed.

Hong Kong-based ANZ Research senior economist Raymond Yeung (楊宇霆) said Taiwan should not lift the base rate until December next year.

“As the low inflationary regime will extend into next year, the central bank will continue to maintain their wait-and-see attitude,” Yeung said in a research note.

As the central bank is likely to link its interest rate policy to the US dollar’s movement, interest rates are expected to stay low most of the time next year, he said.

The New Taiwan dollar fell to a four-month low of NT$30.06 versus the greenback yesterday, shedding NT$0.013 on the Taipei Foreign Exchange Market. It marked the 13th straight session it depreciated against the US dollar.

Perng said the continuous depreciation of the NT dollar reflected a slowdown in net inflows by foreign portfolio investors, as many are on a break due to the Christmas holiday.

“It is a demand and supply issue,” he said.

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