Central bank raises interest rates

17 June, 2022

By ECCT staff writers, CBC


Taiwan’s central bank yesterday raised policy rates by 0.125 percentage points and raised the reserve requirement ratios by 0.25 percentage points. According to an official press release on the website of the Central Bank of the Republic of China (Taiwan) outlining the main monetary policy decisions made at the bank’s quarterly board meeting held yesterday, the decision to raise rates was made given mounting pressures of imported inflation fuelled by rising international commodity prices, which means that domestic inflation is expected to remain elevated. “Meanwhile, as the recent surge of Covid-19 inflections at home disrupted the recovery of domestically-oriented services sector, private consumption growth would likely weaken. In addition, shrouded by downside risks, a more subdued global economic outlook could further weigh on Taiwan's growth momentum.”


According to the press release, the board judged that raising both the policy rates and the reserve requirement ratios would send a clear message that the bank continues to adopt a monetary policy stance of tightening. This will help strengthen the policy effects and rein in domestic inflation expectations, so as to achieve the policy objectives of price stability and sound financial and economic development.


The board decided unanimously at the meeting today to raise the discount rate, the rate on refinancing of secured loans, and the rate on temporary accommodations to 1.5%, 1.875%, and 3.75%, respectively, effective from 17 June 2022.The board also decided unanimously to increase the reserve requirement ratios on NT dollar demand deposits and time (savings) deposits by 0.25 percentage points each, effective from 1 July 2022.


In addition, against the backdrop of intense inflationary pressures and significant downside risks faced by the global economy, the bank will keep close watch on the implications for domestic price trends resulting from the Russia-Ukraine conflict and other geopolitical risks, international commodity price movements, and the global pandemic progress, while also closely monitoring how the monetary policy tightening of major economies would affect economic and financial conditions at home and abroad. Based on the assessments thereof, the bank may adjust its monetary policy timely and appropriately to fulfil the statutory duties of maintaining financial and price stability and fostering economic development within the scope of the above objectives.

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