Interest rates likely to remain static: analysts


TAIPEI — Local analysts have said they do not expect any change in Taiwan’s interest rate despite some of the world’s central banks making moves to tackle the debt crisis in Europe.

China announced Nov. 30 that it was cutting its bank reserve requirement ratio by 50 basis points for the first time since 2008, not long after several central banks in the West announced measures to boost liquidity to weather the impact of the debt crisis in the eurozone.

The U.S., Canada, Japan, the UK and Switzerland, as well as the European Central Bank (ECB), announced last week lower borrowing costs for banks seeking to secure U.S. dollar loans.

Taiwan’s central bank will have its fourth quarterly policy making meeting of this year on Dec. 29.

The president of the Taiwan Research Institute, Wu Tsai-yi, said that “there is no room for a rate hike,” as the Taiwan dollar is now under pressure to rise. If the interest rates are hiked, it would have an impact on economic growth, he said.

He added that private investment recorded negative growth this year although Taiwan has had relatively low interest rates in recent years and that the debt woes in Europe might continue to affect exports in a year or two.

Keeping the current interest rates unchanged would be beneficial for private investment in the coming year, he predicted.

In addition, Cheng Cheng-mount, a vice president of Citibank Taiwan, also said there is a bigger possibility that the central bank will maintain its current rates at the December meeting.

Asked if an interest rate reduction can be expected, he said that “there is no need to lower the rates” because Taiwan’s economy is not that bad.

However, Liang Kuo-yuan, president of the Taipei-based Polaris Research Institute, predicted lower interest rates.

As the global economic outlook remains uncertain, it is possible that the government will boost the economy through monetary policies, he said.

At the third quarterly meeting in late September, the central bank decided to leave its key interest rates unchanged.

The discount rate stood at that time at 1.875 percent, the rate on accommodations with collateral at 2.25 percent and the rate on accommodations without collateral at 4.125 percent.