The central bank yesterday kept its benchmark interest rates unchanged for a fourth time since it decided to stop cutting interest rates in March to help spur the nation’s economic growth.
At its quarterly meeting, the central bank decided to leave the discount rate at 1.25 percent, the rate on collateralized loans at 1.625 percent and the rate on unsecured loans at 3.5 percent.
“Interest rates have remained unchanged because consumer prices are still falling,” central bank Governor Perng Fai-nan (彭淮南) told a media briefing. “Looking ahead, consumer prices will remain subdued before the next board meeting.”
PHOTO: WANG YI-SUNG, TAIPEI TIMES
Perng said the nation’s economy is recovering at a modest pace without inflationary pressure, so maintaining the easy-money policy would facilitate economic activity.
“Until the economic recovery becomes more entrenched and/or there appears to be a severe upside risk to inflation, the central bank will not hike interest rates unnecessarily or hastily,” Tony Phoo (符銘財), chief economist of Standard Chartered Bank (Taiwan) Ltd, said in a statement.
The M2 annual growth rate averaged at 7.32 percent during the period from January to last month, even though it declined to 6.59 percent year on year last month, surpassing the bank’s target range of 2.5 percent to 6.5 percent for the eighth consecutive month.
The central bank attributed decreased M2 growth last month, lower than the 7.28 percent registered in October, to a higher comparison base last November.
M1B money supply, which excludes time deposits, time savings deposits, foreign currency deposits and mutual funds, surged 28.62 percent last month from a year earlier, following a 25.7 percent rise in October, because of the continuing transfer of funds from time deposits to demand deposits, the bank said.
M1B growth last month represented the highest level since April 1989, central bank tallies showed.
Outstanding loans and investments by major financial institutions, including the postal savings system, totaled NT$21.27 trillion (US$659 billion) at the end of last month, down 0.34 percent from a year earlier.
This followed a revised 0.5 percent growth in the previous month, the bank said.
The central bank yesterday also maintained its M2 growth target at between 2.5 percent and 6.5 percent for next year.
Phoo said this suggests that the central bank is “watchful of New Taiwan dollar liquidity and the potential risk to asset price inflation.”
Perng said that Taiwan’s housing price hikes are only regional, so it is not appropriate to adopt such a universal measure as a blunt instrument to curb rising house prices, but to adopt selective measures such as urging banks to adjust mortgage credit lines.
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