The central bank may consider selective credit control measures for the housing market at its board meeting this week because of the sluggish domestic investment environment, which may attract more money into the property market, an economist said yesterday.
The central bank is to hold its quarterly board meeting on Thursday, with a possible extension of selective credit control measures expected to be the main focus.
“With the central bank set to continue its modest easing of monetary policy, it would view a stable property market as a major goal,” Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) director Steven Yang (楊家彥) said.
The central bank may watch the prices of commercial office buildings and luxury accommodation — which the excessive liquidity in the market has interest in, Yang said, adding that extending credit control measures to areas beyond Greater Taipei was possible.
The US Federal Reserve’s plan to phase out quantitative easing measures may increase global cash flow volatility and economic uncertainty, further drawing the central bank’s attention to rates and monetary policy, Yang said.
Yang said the central bank may keep interest rates unchanged, with economic sentiment more sluggish than expected and slow consumer price growth. This could lead to the bank’s discount rate remaining at 1.875 percent for an eighth straight quarter.
“With the current excessive liquidity in the market, it is much less likely that the central bank will drop interest rates,” Yang said.
Some foreign banks and brokerage houses share Yang’s views.
“Sluggish external demand will not affect the central bank’s policy of keeping interest rates on hold at its quarterly board meeting [on Thursday],” ANZ Research senior economist on Greater China Raymond Yeung (楊宇霆) said in a research note.
Leong Wai Ho (梁偉豪), a senior regional economist with Barclays Capital in Singapore, said with rates staying low, the central bank will continue to provide incremental support to the economy by injecting liquidity.
“For the next few months, we believe the central bank will continue to keep liquidity conditions flush at NT$30 billion [US$990.75 million] to NT$35 billion a day, sufficient to keep the overnight rate steady at around 0.38 percent,” Leong said in a research note.
Capital Securities Corp (群益證券) said keeping interest and currency rates stable would help raise economic momentum, a major goal for the central bank.