Central Bank of Taiwan Cuts Discount Rate to 2.0%

December 11, 2008

A reduction of 75 basis points by the Central Bank of Taiwan was 25 basis points greater than the market consensus forecast and raised cumulative cuts since September to 162.5 basis points. 2.0% is the lowest level in slightly more than three years. A statement released by officials of the central bank said CPI inflation would average only 0.37% next year and that the recession since mid-2008 will persist in the first half of 2009. Officials acknowledge that depositors may be inconvenienced in the short run by lower interest income but that lower interest rates and other liquidity-promoting moves will on balance promote consumer spending and overall economic recovery, which helps everybody in the longer run. Monetary policy is being coordinated with a more expansive fiscal policy, and the central bank urged commercial banks to pass on the central bank rate cut to their customers.


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