The central bank is cutting its key interest rate by a quarter percentage point to stimulate the domestic economy, the bank announced yesterday.
"With sagging domestic demand and a weak labor market ... the rate cut was aimed at boosting the economy and reflect the recent trend of declining money-market rates," Yang Chin-long (葉金龍), the bank's banking department director-general, said at a press conference yesterday afternoon following a meeting of 14 central bank officials.
The rate cut, the 14th in the past two years, reduced the key rediscount rate from 1.875 percent to 1.625 percent, effective today.
Taiwan's economy is gradually recovering from a recession that began early last year. The Directorate General of Budget, Accounting and Statistics forecasts the economy to grow 3.14 percent this year.
Yang said that growth in the economy would mainly come from the nation's export sector rather than an increase in domestic demand.
Therefore, every one percentage point reduction in the rediscount rate would boost the nation's economy by 0.11 percentage points, even though it normally takes about a year before the effects of rate cuts materialize, Yang said.
The central bank yesterday also lowered its secured loan rate from 2.25 percent to 2 percent and the unsecured loan rate from 4.125 percent to 3.875 percent, Yang said.
The central bank's rate cut were widely expected by the local financial market, after the US Federal Reserve last week moved to strengthen the US economy by reducing its benchmark overnight rate by a larger-than-expected half percentage point from 1.75 percent to 1.25 percent.