Taipei, June 13 (CNA) The Central Bank of the Republic of China (Taiwan) said on Thursday that it has decided to leave its key interest rates unchanged after wrapping up a quarterly policymaking meeting.
The decision was in line with earlier market expectations, particular after the U.S. Federal Reserve maintained its monetary policy overnight in a two-day policymaking meeting.
In the previous quarterly policymaking meeting held in March, the local central bank surprised the market by raising interest rates 12.5 basis points to combat expected higher inflationary pressure following an average 11 percent electricity tariff increase in April.
After the Thursday decision, the discount rate remains at 2 percent but is still at a 15 year high, with collateral at 2.375 percent and the rate on accommodations without collateral at 4.250 percent.
Liquidity tightened
However, the central bank also decided to raise the required Taiwan dollar deposit reserve ratio, which is the proportion of deposits regulators require banks to hold in reserve and not loan, by 25 basis points.
Market observers said the move to the hike deposit reserve ratio seeks to drain liquidity and cool the local home market.
In addition, the central bank also decided to lower the mortgage ceiling, which is the ratio of mortgages to the value of an individual's second home, in certain areas from 70 percent to 60 percent, as a further measure to rein in manipulation in the property market.
Inflation
Earlier this month, Wu Meng-tao (吳孟道), head of the sixth research division of the Taiwan Institute of Economic Research, said the March surprise rate hike helped to cap inflationary pressure.
Wu cited Yang Chin-long (楊金龍), the central bank governor, as saying that more than 2 percent growth was not necessarily problematic as Taiwan's inflation is relatively low compared to many other countries.
In May, Taiwan's consumer price index rose 2.24 percent from a year earlier, higher than the 2 percent central bank target. In the first five months of this year, the CPI grew 2.24 percent, also topping the 2 percent target.
In fact, Yang said at a recent legislative hearing that it was not appropriate for the central bank to surprise the market too often, hinting the it would not raise rates this time.
Update
June 13: Central bank upgrades Taiwan's GDP growth forecast for 2024
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