Thu, Jul 11, 2024 page12

• Central bank to hold interest rates

  MARKET WATCH: Although rising house prices are outside the central bank’s purview, it would take action if an uptrend creates a bubble or threatens the financial market, it said

  • By Crystal Hsu / Staff reporter
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  Inflationary pressure in Taiwan has eased, but the central bank has no intention of cutting interest rates anytime soon, central bank Governor Yang Chin-long (楊金龍) said yesterday.

  Rather, the central bank would take further steps to rein in the property market, if necessary, Yang said at a meeting of the legislature’s Finance Committee after the nation’s consumer price index (CPI) last month rose 2.42 percent from a year earlier — above the central banks’ 2 percent target — due to higher food costs.

  The 4.16 percent increase in food costs had much to do with seasonal heavy rainfalls that disrupted fruit and vegetable supply and pushed up their prices, the Directorate-General of Budget, Accounting and Statistics said last week.

  

  Central bank Governor Yang Chin-long speaks at a meeting of the legislature’s Finance Committee in Taipei yesterday.

  Photo: Liu Hsin-de, Taipei Times

  However, the core CPI, a more reliable long-term price tracker because it excludes volatile items, increased 1.83 percent last month, having returned to the 2 percent target for three months in a row, Yang said.

  While global central banks have lowered interest rates or plan to do so, Taiwan will not follow suit, the governor said.

  Instead, the central bank will chart its own monetary policy, guided by the nation’s economic and financial interests, he said.

  The central bank in March raised interest rates 12.5 basis points as it sought to quell inflation expectations ahead of electricity rate hikes in April.

  Last month, the bank announced it would raise its reserve requirement ratio 25 basis points starting this month in an effort to prevent an overconcentration of real-estate loans, Yang said.

  Lawmakers from across party lines have voiced concerns over steep increases in house prices induced partly by a government interest subsidy and other favorable lending terms for first-home buyers.

  Rising house prices fall outside the central bank’s responsibility unless an uptrend creates bubbles and threatens the financial market’s stability, Yang said.

  The system’s bad loan ratio remains at ultra-low levels and a recent stress test showed that local lenders would emerge unharmed from house price corrections, he said.

  The central bank will not hesitate to take action to dampen a housing craze when it spots a need for it, the governor said, adding that the bank has tightened credit controls for purchases of luxury apartments and second homes in popular areas as well as for land financing.

  Yang said he would support a pay raise for government employees to reflect economic growth, if doing so would not burden the national treasury.

  In addition, a pay raise for civil servants would not fuel inflation, unlike base wage hikes that would drive up production costs for all business sectors, he said.
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