Taiwan Central bank leaves interest rates unchanged (update)

Taipei, After concluding a quarterly policymaking meeting on Thursday, Taiwan’s central bank decided to leave its key interest rates unchanged, a move widely anticipated by the market.

Following the decision, the discount rate remains at 1.125 percent, the lowest in the country’s history, according to the bank.

Meanwhile, the rate on accommodations with collateral is unchanged at 1.50 percent, while the rate on accommodations without collateral stays at 3.375 percent, the central bank said.

This is the fourth consecutive quarter the central bank has maintained its monetary policy, at a time when Taiwan has seen little inflationary pressure, with local consumer prices stable, analysts said.

Moreover, as the world’s major central banks continue to keep their interest rates low by pumping funds into the market to counter the economic impact of the COVID-19 pandemic, there is no urgent need for the local central bank to adjust its monetary policy, according to analysts.

Just ahead of the central bank’s decision, the U.S. Federal Reserve wrapped up a two-day policymaking meeting overnight and left its benchmark interest rates intact. The Fed also said it expects interest rates to remain near to zero for the next two years and upgraded its national economic outlook.

Thursday’s policymaking meeting also raised Taiwan’s gross domestic product (GDP) growth forecast for 2021 to 4.53 percent from an estimate of 3.68 percent made in December.

The forecast was in line with the outlook of Central Bank Governor Yang Chin-long (???), who said in a recent legislative hearing that Taiwan’s economy is staging a V-shape rebound, as the COVID-19 impact fades.

The central bank’s forecast, however, was slightly lower than that of the Directorate General of Budget, Accounting and Statistics (DGBAS), which estimated in February that Taiwan’s economy will grow 4.64 percent in 2021.

According to the central bank, Taiwan’s consumer price index is expected to grow 1.07 percent, an upgrade from its previous estimate of 0.92 percent. The bank also raised its growth forecast for the country’s core CPI, which excludes fruit, vegetables, and energy, from 0.71 percent to 0.77 percent.

Meanwhile, following the Cabinet’s move last week to rein in home price speculation, the central bank set a new ceiling for mortgages, limiting them to 40 percent of the home value for enterprise buyers and other legal entity purchasers, effective Friday.

Currently, the mortgage cap for the first home of enterprise buyers and other legal entity buyers is set at 60 percent, and at 50 percent for subsequent housing properties.

The lowering of the mortgage cap takes into account a tendency among enterprises and other legal entities to stockpile houses or flip them, practices that contribute to market speculation, the central bank said.

For individual home buyers who own multiple properties, the mortgage cap has been lowered from 60 percent to 55 percent on their third home, and from 60 percent to 50 percent on subsequent properties, the central bank said.

In terms of luxury homes, the central bank said, the mortgage cap has been dropped from 60 percent to 55 percent for up to three properties, and from 60 percent to 40 percent for additional purchases.

It said that in other types of mortgages, banks will be permitted to lend up to 55 percent of the value of idle land in industrial zones.

According to the central bank, high-priced luxury homes are classified as those valued at more than NT$70 million (US$2.47 million) in the country’s capital Taipei.

In New Taipei, the most populous city in the country, high-priced luxury residential properties are those valued at more than NT$60 million, according to the central bank definition. Elsewhere in Taiwan, housing units with a value of over NT$40 million are classified as high-priced luxury homes.

Source: Focus Taiwan News Channel