Taiwan central bank cut overnight rate by 1 BP

Taiwan’s central bank lowered its overnight rate by 1 basis point on Friday, the seventh cut since July 13, according to a central bank official and traders, as a worsening global growth outlook continues to pressure the island to follow other central banks in easing monetary conditions.

The central bank cut the overnight rate to 0.390 percent from 0.400 percent Thursday. The central bank cut the rate by two basis points in each of the past four days, after cutting the rate twice on July 13 to 0.480 percent from 0.506 percent.

“We made the change based on market conditions,” said the official, who declined to be named.

The official said the central bank is “unlikely” to cut the rate again on Friday.

The official said the overnight rate, after the cuts, is now near the 0.399 percent level on March 23, when the rate started to climb in response to rising inflationary expectations following increases in domestic fuel and electricity prices.

The recent consecutive cuts, which are the first since May 11, come after the central bank left policy rates unchanged at its last meeting in June due to global uncertainties. In recent weeks, other central banks in the world have lowered interest rates to stimulate economic growth.

However, economists and traders said they don’t expect the central bank’s “current bias toward easing” to extend to policy interest-rate cuts, at least for the next quarter or two. Such cuts, they say, will further spur inflationary pressure and strengthen real-estate prices, whose increasing levels have already caused public discontent. The island’s discount rate is a very low 1.875 percent, and any further cuts might not have much impact, they added. -By Fanny Liu

http://online.wsj.com/article/BT-CO-20120719-720346.html

 

Category: Taiwan