The central bank on Friday said that it earlier in the day lifted the interest rate it pays domestic banks for funds held in reserves after raising its policy rates for the third consecutive quarter by 12.5 basis points a week ago.
The interest it pays on reserves originating from passbook deposits on Friday rose to 0.396 percent, while the amount paid on time deposits advanced to 1.083 percent.
That compared with the 0.271 percent interest rate for passbook deposits and the 0.955 percent rate for time deposits before the latest adjustments, central bank data show.
Photo: George Tsorng, Taipei Times
The interest is paid to domestic financial institutions’ B accounts, which account for 55 percent of their reserves, the central bank said, adding that the monetary authority does not pay interest on the remainder of reserves in A accounts.
The move increases costs for the central bank as it pays more to domestic financial institutions that deposit the required reserves.
However, as local lenders increased their deposit rates after the central bank raised its rates on Sept. 23, the monetary authority decided to adjust the interest on its B accounts to reflect the increase in capital costs at local banks, the statement said.
Apart from an increase of 12.5 basis points on its policy rates on Sept. 23, the central bank also on Saturday increased the reserve requirement ratios on New Taiwan dollar demand deposits and time saving deposits by 25 basis points.
While the central bank did not hike rates as aggressively as some economists predicted, its latest actions show that it could tighten fiscal policy throughout the remainder of the year to fight inflationary pressures, analysts said.
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