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.
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