Central Bank of China

PRESS RELEASE Release Date: June 28, 2001




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MONETARY POLICY DECISIONS OF THE CBC BOARD MEETING (June 28, 2001)

In line with the deliberations made at the Board meeting on June 28, the future directions for monetary policy of the Central Bank of China, Taipei, shall be the following:

1.The Bank decided to cut the discount rate, the rate on accommodations with collateral and the rate on accommodations without collateral each by 25 basis points, from 3.75%, 4.125% and 6.0% to 3.50%, 3.875% and 5.75%, respectively, effective from June 29. The decision is made by taking into account the precondition that inflationary pressures remain subdued and the fact that domestic demand and employment need to be stimulated.

2.Taiwan has registered a sustained current account surplus and has enjoyed abundant foreign exchange reserves. While the real effective exchange rate index of the NT dollar stands at a record-low level, a few ungrounded media reports have recently generated expectations of an NT dollar depreciation, which has unduly caused some fluctuations in the foreign exchange market. The Bank reiterated that the NT dollar exchange rate is determined by market forces. However, when the foreign exchange market is disrupted by seasonal or irregular factors, or irrational expectations, the Bank will step in to maintain the dynamic stability of the NT dollar exchange rate.

3.Affected by the slowing economy, some banks have registered limited growth in lending and investments. To reduce the credit risk faced by banks, the Bank has worked with the Ministry of Finance to expand the credit guarantee fund. The Bank encouraged banks to extend credit to the corporations in sound operation under the prerequisite of risk control so as to fulfill banks' intermediary function and social responsibility.