The central bank yesterday cut its policy rates by 12.5 basis points and removed all credit controls on housing transactions, except for luxury homes, as the economy continued to deteriorate and housing transactions fell to a 14-year low.
The rate cut, the third since September last year, came after the economy slipped into a recession, with GDP contracting for the past two quarters, and looked set to remain in negative territory this quarter and beyond.
“A rate cut is favorable to maintaining financial stability and boosting confidence when exports fare poorer than expected amid global headwinds,” central bank Governor Perng Fai-nan (彭淮南) told a news conference after the bank’s quarterly board meeting.
 
                    Photo: Chen Chih-chu, Taipei Times
The central bank lowered the rediscount rate to 1.5 percent, the collateralized loan rate to 1.875 percent and the unsecured loan rate to 3.75 percent.
However, monetary policy alone cannot turn the economy around, and the public and private sectors should join forces in directing the nation’s excess savings to private investments, Perng said.
The Australia and New Zealand Banking Group (ANZ) said the latest rate cut could discourage capital inflows that have muted the New Taiwan dollar’s fall this year.
“The central bank is wary of capital inflows due to the monetary easing by peers in Europe and Japan,” Hong Kong-based ANZ economist Raymond Yeung (楊宇霆) said in a note.
Perng said he saw no need to keep various mortgage restrictions introduced since June 2010 because they have achieved their purpose of curbing property speculation.
The central bank had subjected houses in Taipei and 15 popular areas of New Taipei City to a mortgage ceiling of 60 percent due to their soaring prices in recent years. The restriction had also extended to multiple home owners and corporate buyers nationwide.
“Housing prices have corrected across the nation, with transactions last year plunging to the lowest level since the technology bubble burst in 2002,” Perng said.
However, the central bank is keeping the 60 percent cap for houses valued at NT$70 million (US$21.39 million) or more in Taipei, NT$60 million in New Taipei City and NT$40 million elsewhere, citing loan overconcentration among lenders.
“Internal data suggest a continued need for credit controls on luxury housings despite a sluggish market,” Perng said.
Luxury housing, especially in the capital, has borne the brunt of tightening measures, particularly a sharp increase in house taxes.
Sinyi Realty Inc (信義房屋), the nation’s only listed real-estate broker, said the loosened credit controls might introduce a healthy dose of confidence to the market without reviving property fever.
“The [central bank’s] sends a message, that the government is suspending policies that are unfavorable to the market,” Sinyi researcher Tseng Chin-der (曾敬德) said, adding that “sentiment should turn from negative to neutral.”
The central bank also scrapped a loan ceiling of 65 percent for land deals.

PEACE AND STABILITY: Maintaining the cross-strait ‘status quo’ has long been the government’s position, the Ministry of Foreign Affairs said Taiwan is committed to maintaining the cross-strait “status quo” and seeks no escalation of tensions, the Ministry of Foreign Affairs (MOFA) said yesterday, rebutting a Time magazine opinion piece that described President William Lai (賴清德) as a “reckless leader.” The article, titled “The US Must Beware of Taiwan’s Reckless Leader,” was written by Lyle Goldstein, director of the Asia Program at the Washington-based Defense Priorities think tank. Goldstein wrote that Taiwan is “the world’s most dangerous flashpoint” amid ongoing conflicts in the Middle East and Russia’s invasion of Ukraine. He said that the situation in the Taiwan Strait has become less stable

Japanese Prime Minister Sanae Takaichi yesterday lavished US President Donald Trump with praise and vows of a “golden age” of ties on his visit to Tokyo, before inking a deal with Washington aimed at securing critical minerals. Takaichi — Japan’s first female prime minister — pulled out all the stops for Trump in her opening test on the international stage and even announced that she would nominate him for a Nobel Peace Prize, the White House said. Trump has become increasingly focused on the Nobel since his return to power in January and claims to have ended several conflicts around the world,

REASSURANCE: The US said Taiwan’s interests would not be harmed during the talk and that it remains steadfast in its support for the nation, the foreign minister said US President Donald Trump on Friday said he would bring up Taiwan with Chinese President Xi Jinping (習近平) during a meeting on the sidelines of the APEC Summit in South Korea this week. “I will be talking about Taiwan [with Xi],” Trump told reporters before he departed for his trip to Asia, adding that he had “a lot of respect for Taiwan.” “We have a lot to talk about with President Xi, and he has a lot to talk about with us. I think we’ll have a good meeting,” Trump said. Taiwan has long been a contentious issue between the US and China.

UKRAINE, NVIDIA: The US leader said the subject of Russia’s war had come up ‘very strongly,’ while Jenson Huang was hoping that the conversation was good Chinese President Xi Jinping (習近平) and US President Donald Trump had differing takes following their meeting in Busan, South Korea, yesterday. Xi said that the two sides should complete follow-up work as soon as possible to deliver tangible results that would provide “peace of mind” to China, the US and the rest of the world, while Trump hailed the “great success” of the talks. The two discussed trade, including a deal to reduce tariffs slapped on China for its role in the fentanyl trade, as well as cooperation in ending the war in Ukraine, among other issues, but they did not mention