The nation's central bank cut its key lending rate by one-eighth of a point (0.125 percent) to a record low at its quarterly policy meeting yesterday as it sought to boost the ailing economy, which is suffering its worst slump since the 1970s.
The cut came after the New Taiwan dollar ended at a 15-year low of NT$35.127 against the US dollar yesterday, on turnover of US$560 million.
Dealers said a continuing decline in the Japanese yen weighed on the local currency.
The central bank slashed the key rediscount rate for 10-day loans to 2.125 percent, according to a statement released after the meeting.
"It highlights, in Taiwan's case, that the authorities are very concerned about the economy," said Robert Subbaraman, an economist at Lehman Brothers Japan Inc.
The country's economy is in "deep recession," with record unemployment and a banking system that isn't functioning properly.
A weak banking sector can't spur loan growth, though a rate reduction can reduce interest payments of heavily indebted households and companies if commercial banks reduce their rates, he said.
The economy contracted 4.2 percent in the third quarter from a year earlier as exports tumbled, falling into its deepest recession since the 1970s.
The jobless rate climbed to an 11th straight monthly record in November as companies shed workers and moved production to China to cut costs amid falling orders from overseas customers.
Perng Fai-nan (彭淮南), governor of the central bank, said after the meeting that the government would "continue to maintain a loose monetary policy next year."
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