In yet another surprise move, the central bank yesterday lowered key interest rates for the fourth time in one-and-a-half months, citing concerns over global recession and a slump in exports.
Central bank Governor Perng Fai-nan (彭淮南) told an unscheduled evening news conference that the bank’s board would reduce the discount rate, the rate on accommodations with collateral and the rate on accommodations without collateral by 25 basis points each to 2.75 percent, 3.125 percent and 5 percent respectively.
“The new rates take effect today,” the top monetary regulator said. “We hope the cut can reverse dwindling domestic demand and spur economic growth as external demand has fallen sharply, amid the international financial turmoil.”
Perng voiced worries that exports, the main driver of the nation’s GDP growth, would contribute markedly less to the growth this year and beyond, after declining for two straight months.
On Friday, the Ministry of Finance said exports dropped 8.3 percent last month from a year earlier, the largest decline in nearly seven years, following a decline of 1.6 percent in the previous month. In particular, shipments to China and Hong Kong, accounting for 40 percent of the export volume, plunged nearly 20 percent last month.
Defending the rate cut, Perng said the IMF recently revised downward its GDP growth forecasts for developed countries next year when the US, the Eurozone, Japan and the UK were all expected to experience economic recession.
“The [recession’s] impact on Taiwan will be huge in light of the nation’s small economic scale and heavy dependence on foreign trade,” Perng said.
He said the nation’s financial system was stable, and government agencies were studying more measures to ensure sufficient liquidity among banks for small and medium enterprises.