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Interest rate hike likely in second half of 2012: think tank

2012/04/16 22:32:08

Taipei, April 16 (CNA) Potentially higher inflation driven by increases in fuel prices and electricity rates and an economic rebound starting in the second quarter have increased the likelihood that Taiwan's central bank will raise interest rates, a private think tank said Monday.

The Polaris Research Institute predicted that interest rates will remain unchanged in the first half of the year but said the chances of a rate hike in the second half are quite high.

The Central Bank of the Republic of China (Taiwan) could raise interest rates as early as the third quarter, the think tank said, and it estimated the odds of a rate hike at 80 percent, up from 50 percent in its March forecast.

The central bank's current discount rate stood at 1.875 percent, the rate on accommodation with collateral was 2.25 percent and the rate on accommodation without collateral was 4.125 percent.

Polaris saw Taiwan's economy hitting bottom in the first quarter as expected and then gradually rebounding in the second quarter, but with fuel and electricity prices on the rise, it said movements in domestic consumer prices still needed to be watched.

On international oil prices, the think tank did not expect crude prices to rise quickly in the short term because of potentially weaker demand and no apparent worsening of the Iranian nuclear crisis.

It predicted oil prices to range between US$99 and US$106 per barrel in the coming week.

(By Wu Ching-chun and Lilian Wu)