Central bank hikes key interest rate by 0.125 percent

The China Post news staff and CNA

TAIPEI, Taiwan — The Central Bank of the Republic of China announced a 0.125-percentage-point hike in its discount rate yesterday, bringing its benchmark interest rate on loans to banks to 1.50 percent to go into effect from today.

Which means if an average citizen has a loan of NT$1 million from a bank, he will have to pay an extra of NT$104 in interests to the bank every month. The central bank also raised the rate on accommodations with collateral by 0.125 percentage points to 1.875 percent and the rate on accommodations without collateral to 3.750 percent.

The increases, announced in a quarterly policy-making meeting that day, were the second since June, when the central bank raised its discount rate by 0.125 percentage points to 1.375 percent after Taiwan’s economy staged a strong rebound in the first half of this year, thanks to its recovery from the global recession.

The June hike marked the first time since 2008 that the central bank had raised its key interest rate.

The government has raised its forecast for Taiwan’s 2010 gross domestic product (GDP) growth to 8.24 percent from the previous estimate of 6.14 percent, after a 13.71 percent GDP increase for the first quarter and a 12.53 percent rise for the second quarter.

The central bank had lowered its discount rate seven times from September 2008 by a total of 2.375 percentage points before suspending the downward adjustment streak in the first quarter of last year. Since then, it had kept its key interest rate unchanged for five consecutive quarters.