Taiwan: Central Bank keeps policy unchanged in September; tightens measures to stem house prices
September 23, 2021
At its monetary policy meeting on 23 September, the Board of Directors of Taiwan’s Central Bank (CBC) kept rates unchanged, leaving the discount rate at the record low of 1.125%. However, the Bank did tighten some targeted measures to contain rising house prices, which included lowering the loan-to-value (LTV) ratio to 60%, from 65% previously.
The country’s economy continues to benefit from robust activity, leading the Bank to revise its growth forecast for 2021 to 5.8% from 5.0% previously. Likewise, inflation forecasts for this year were also revised up to 1.7% from 1.6%. That said, inflation has been relatively low, with the 12-month average clocking in at 1.0% in August. Consequently, the Bank decided there was no urgent need to either cut or raise rates.
Looking ahead, the Bank is expected to keep the key policy rate on hold due to under-control inflation amid an uneven but ongoing recovery in economic activity. However, the recent move to lower the LTV ratio suggests that the Bank could continue to use other tools to enforce its policy on specific issues within the economy. The majority of our panel sees the key rate ending 2021 at 1.125%, and expects policy tightening to begin in the second quarter of 2022.
Author: Frederico Teixeira de Abreu, Junior Economist