Taiwan maintains discount rate at 1 7/8% amid global uncertainty

By Toni Weeks

San Diego, Sept. 29 - Central Bank of the Republic of China (Taiwan) said it will maintain the discount rate at 1 7/8% at its policy meeting Thursday. It also decided to keep the rate on accommodations with collateral and the rate on accommodations without collateral unchanged at 2¼% and 4 1/8%, respectively.

Investor and consumer confidence has dampened as European countries struggle to resolve the sovereign debt crisis and the U.S. economy continues to deal with its financial challenges, and most economic forecasters have revised down their global growth projections for 2011 and 2012, according to a bank press release.

Though Taiwan's economy exhibited strength in the first half of this year, growing by 5.58% year on year, weaker external demand in the second half of the year is causing some moderation in exports, export orders, industrial production and private investment. As a result, the directorate-general of budget, accounting and statistics has revised down its forecast for Taiwan's economy to 4.11% for the second half of the year and 4.81% for 2011 overall, followed by 4.58% for 2012.

Consumer Price Index inflation in Taiwan was 1.34% in August but is expected to increase 1.75% in the second half of the year, averaging 1.59% in 2011 overall and growing by 1.21% in 2012. All of the figures are lower than the agency's previous forecasts.

The bank's five previous policy rate hikes have influenced banks' overnight call-loan rates to rise steadily and bank credit was on the rise, the release noted.

Overall, global economic uncertainties may adversely affect Taiwan's economic growth, while inflation expectations have abated. The board said that maintaining policy rates at current levels would help continue economic development in Taiwan.

The board raised the discount rate by 12.5 basis points to 1 7/8% at its policy meeting on June 30 and by 12.5 bps to 1¾% at its meeting on March 31.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.