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Central Bank of the Republic of China

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Monetary Policy Decisions of the Board Meeting(December 27, 2001)

PRESS RELEASE Release Date: Dec. 27, 2001




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MONETARY POLICY DECISIONS OF THE BOARD MEETING

In line with the deliberations made at the Board meeting on December 27, the future directions for monetary policy of the Central Bank of China (CBC) shall be the following:

1.To maintain the dynamic stability of the NT dollar exchange rate, the CBC will step in, as deemed appropriate, when the foreign exchange market is disrupted by seasonal or irregular factors, or by irrational expectations.

2.The M2 monetary aggregate is the intermediate target of the CBC's monetary policy. After considering the economic growth and price conditions for next year, measuring the impacts of domestic and foreign interest spread, capital gain differential and financial asset diversification on money demand, as well as consulting scholars and experts, the Board sets the target range for M2 growth at between 3.5% and 8.5% for 2002.

3.The country's performance in import-export trade, industrial production, capacity utilization rate of the manufacturing sector and corporate profits remains weak. The imminent entry to the World Trade Organization anticipates a period of adjustment in industrial structure. The banking sector remains sluggish in extending credit. Under these circumstances, the CBC seeks to stimulate the economy by cutting the discount rate, the rate on accommodations with collateral and the rate on accommodations without collateral by 12.5 basis points to 2.125%, 2.5% and 4.375%, respectively, effective from December 28.

4.To meet the seasonal fund demand over the new year, the CBC has appropriately arranged the maturing dates of the certificates of deposits it issues. The CBC will also fully support financial institutions encountering short-term liquidity shortage through open-market operations, the discount window and other accommodation measures.

 

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