Monetary Policy Decisions of the Executive Directors Meeting
PRESS RELEASE Release Date: November 9, 2008
Monetary Policy Decisions of the Executive Directors Meeting
I. 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 2.75%, 3.125% and 5.00%, respectively, effective from November 10.
II. The decision is based on the following considerations:
1. In recent months, the international prices of energy and other commodities have fallen sharply from their peaks, thus the pressure of imported inflation previously facing Taiwan is approaching a level consistent with price stability.
2. The global economic outlook has deteriorated. According to the latest forecast issued by the International Monetary Fund, the US, the euro area, Japan, the UK and the advanced economies as a whole will suffer contraction while China's growth will slow appreciably in 2009. As globalization links economies around the world closely together, Taiwan, a small and highly open economy, is susceptible to a global economic downturn. Slackened demand from abroad has caused Taiwan's exports growth to turn negative for two consecutive months, greatly restraining the contribution of external demand to economic growth. On top of this, increased financial market volatility and rising unemployment have dampened domestic consumption and investment expenditure. These factors have increased the downside risks to Taiwan's economic growth. Successive interest rate cuts will help stimulate domestic demand and promote economic growth.
III. The CBC reaffirmed that Taiwan's financial system remains stable and that bank lending shows continued growth. The government has declared full guarantee coverage on all bank deposits and interbank loans to ensure that liquidity in the banking system is sufficiently supportive of its intermediary function. In addition, the Small and Medium Enterprise Credit Guarantee Fund has raised the guarantee coverage percentage on borrowings made by small and medium-sized enterprises (SMEs). A project finance and guarantee program for enterprises other than SMEs has also been drawn up by government agencies.