MarketWatch: Rising home prices are outside the central bank's purview, but the bank said it would take action if the upward trend creates a bubble or threatens financial markets.
Crystal Shu / Reporter
Inflationary pressures in Taiwan are easing but the central bank does not intend to cut interest rates anytime soon, Bank of Taiwan Governor Yang Chin-long said yesterday.
Rather, the central bank will take further measures to curb the property market if necessary, Yang told a meeting of parliament's finance committee after the national consumer price index (CPI) rose 2.42 percent year-on-year last month, above the central bank's 2 percent target.
But core CPI, which is a more reliable long-term indicator of prices because it removes volatile items, rose 1.83% last month, returning to the 2% target for the third consecutive month, he said.
Photo: Liu Hsin-tak, Taipei Times
The governor said that while central banks around the world have cut or plan to cut interest rates, Taiwan does not intend to follow suit.
Instead, the central bank will formulate its own monetary policy in accordance with the country's economic and financial interests, he said.
The central bank raised interest rates by 12.5 basis points in March to cap inflation expectations ahead of an electricity tariff hike in April.
Yang said last month that the bank had announced it would raise its reserve requirement ratio by 25 basis points starting this month to prevent excessive concentration in real estate loans.
Lawmakers across party lines have expressed concern that home prices are soaring due to government interest subsidies and other favorable lending terms for first-time homebuyers.
Yang said rising home prices were outside the central bank's responsibility unless the upward trend created a bubble and threatened financial market stability.
He said domestic banks' non-performing loan ratios remain extremely low and recent stress tests showed that a correction in housing prices would not hurt local financial institutions.
The governor said the central bank would not hesitate to take measures if it felt necessary to curb the home-buying frenzy, adding that it was tightening credit controls not only on land loans but also on the purchase of luxury apartments and second homes in popular areas.
Yang said he supports raising civil servant salaries to reflect economic growth, provided it doesn't put a strain on the national treasury.
Moreover, he said salary hikes for civil servants would not fuel inflation, unlike basic salary hikes which would increase production costs for all business sectors.
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