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Central bank sees key interest rates remaining unchanged

2013/09/13 19:20:07

Taipei, Sept. 13 (CNA) Several foreign banks said Friday that they expect the local central bank to leave key interest rates unchanged during the upcoming quarterly policymaking meeting scheduled for Sept. 26.

Among the foreign banks, the Australia and New Zealand Banking Group Ltd. (ANZ) said that as Taiwan's economy is growing at only a mild pace, the central bank is expected to maintain ample liquidity in the market to give the economy a boost.

ANZ further stated that it is unlikely for the central bank to tighten its monetary policy during the next policymaking meeting.

In mid-August, the Taiwanese government had cut its forecast for local economic growth for 2013 to 2.31 percent from an earlier estimate of 2.40 percent, citing slower investment and weaker exports.

At its last policymaking meeting held in late June, the central bank had said interest rates would remain unchanged, maintaining the discount rate at 1.875 percent, the rate of accommodations with collateral at 2.25 percent and the rate of accommodations without collateral at 4.125 percent.

This was the eighth consecutive quarter during which the central bank reiterated its key interest rates.

Barclays Plc. also anticipates the central bank's key interest rates to remain unchanged during the September quarterly meeting.

Tony Phoo, chief economist at the Standard Chartered Bank Taiwan, also agreed, pointing out that in addition to slow economic growth, Taiwan is also facing a few inflationary threats, because of which he does not anticipate the central bank to tighten money supply at the upcoming meeting.

In August, the local consumer price index fell for the first time in more than three years due to a relatively high comparison base seen during the same period of last year. The August CPI was down 0.79 percent year-on-year and CPI growth averaged only 0.87 percent during the first month of the year.

However, Phoo noted that as the government has decided to raise domestic electricity rates by 8.49 percent from Oct. 1 and the Taiwan High Speed Rail is scheduled to hike fares by 7.1 percent and 9.6 percent from Oct. 8, local consumer prices are expected to face upward pressure.

The economist added that Taiwan will see a heavier inflationary pressure in the future, which might prompt the central bank to start raising its key interest rates during the first quarter of next year at the earliest.

(By Kao Chao-fen and Frances Huang)