The central bank is expected to tighten selective credit controls for a third time at its quarterly meeting next week, as the property market continues to heat up, the chief economists at Cathay United Bank (國泰世華銀行) and SinoPac Financial Holdings Co (永豐金控) said yesterday.
Rising housing prices are a greater concern for the bank, taking precedence over inflation or the New Taiwan dollar’s exchange rate, Cathay United Bank chief economist Lin Chi-chao (林啟超) told a meeting in Taipei.
“Surging housing prices have prompted widespread criticism, with mortgages and construction loans combined hitting a record NT$11 trillion [US$396.51 billion], about 54 percent of Taiwan’s GDP. The bank is likely to strengthen credit controls further to address these phenomena,” Lin said.
Photo: Allen Wu, Taipei Times
The credit controls are forecast to remain in effect for one more year, and they would only become more stringent, he added.
SinoPac Financial chief economist Jack Huang (黃蔭基) agreed, saying that the central bank is expected to maintain benchmark interest rates unchanged, but might tighten its grip on mortgages at its quarterly policymaking meeting on Thursday next week.
SinoPac Financial is sticking to its forecast that the central bank would not hike benchmark rates until the fourth quarter of next year, Huang said.
Photo: Kelson Wang, Taipei Times
However, the central bank should raise interest rates sooner, as rising inflation would slow consumption, he said.
The central bank implemented selective credit controls in December last year and added new measures in March and September to cap the loan-to-value ratio and bar banks from granting grace periods to buyers of a second house in several major cities.
Rising inflation worldwide is not likely to ease soon, as it is partly caused by high shipping rates amid congestion at global ports, which might persist in the near term, Lin said.
The central bank might raise interest rates by 25 basis points in the second half of next year, if the US Federal Reserve lifts its rates first, he said.
The NT dollar is forecast to rise against the US dollar in the first half of next year due to the trade imbalance, but after the second quarter, the local currency would be under pressure to depreciate if the Fed were to hike rates, Lin said.
Lin forecast that the exchange rate would hover between NT$27 and NT$28 against the greenback, with little chance of the local currency reaching NT$29, he said.
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