Monetary Policy Decisions of the Executive Directors Meeting
PRESS RELEASE Release Date: October 30, 2008
Monetary Policy Decisions of the Executive Directors Meeting
I. The following decisions were made in today's executive directors meeting of the CBC:
1. The CBC decided to lower the discount rate, the rate on accommodations with collateral, and the rate on accommodations without collateral by 25 basis points each to 3%, 3.375% and 5.25%, respectively, effective from today.
2. To reflect the movements of market interest rates, the remunerative rates on financial institutions' required reserves kept in B accounts* with the CBC will be adjusted according to the average interest rate on deposits placed with the five leading domestic banks.
II. The decision to lower the policy rates is based on the following considerations:
1. Inflationary pressure subsiding and inflation expectations dampened: As international oil and raw material prices have come down from their previous peaks, inflationary pressure has lessened.
2. Domestic economic activity slowed and the downside risks to growth increased: In recent months, economic indicators, such as exports growth, industrial production, consumption and employment, have been less than satisfactory. Amid slowing economic activity and rising downside risks, an interest rate cut should help stimulate the economy and promote growth.
III. The CBC reduced required reserve ratios on NT dollar deposits, and expanded the scope and lengthened the terms of Repo operations in September. More recently, the CBC raised the credit line for banks to extend funding to securities firms. These measures have ensured that the liquidity needs of financial institutions are met. The CBC will continue paying close attention to the liquidity conditions of financial institutions to maintain financial stability.
* Note: Banks hold two types of reserve accounts with the CBC: A accounts are non-interest bearing and allow for withdrawals; B accounts are interest bearing, normally do not allow for withdrawals, and require a minimum deposit of 55% of required reserves.