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CBC Tends to Keep The Existing Low Rates

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Core Tip: Taipei,Sept.7,2012--In the face of the sluggish economy and rising inflation,the Central Bank of China(CBC)tends to keep the existing low rate

Taipei,Sept.7,2012--In the face of the sluggish economy and rising inflation,the Central Bank of China(CBC)tends to keep the existing low rates,to bolster economic growth,while tightening fund control,to avoid its flow to the realty market for speculation.Aware of the moderately loose tight monetary policy and rock-bottom level of interest rates,enterprises have stepped up issuance of corporate bonds recently.

Renowned for its flexible financial management,Formosa Plastics Group(FPG)has decided to float 10-year corporate bonds.In addition,Uni-President Enterprises and Taiwan Power have rushed to issue corporate bonds recently,as they believe domestic interest rates are unlikely to drop further and issuance of long-term bonds at present can save long-term funding cost.

Managers of securities firms analyzed that the government intends to encourage investments by insurance funds in public construction projects.Life insurance firms have been the most important buyers of long-term bonds and diversion of insurance funds to public construction projects may jack up interest rates of long-term bonds,prompting enterprises to float corporate bonds in a rush.

The CBC is scheduled to hold the meeting of board of directors and supervisors for the third quarter on September 20.The European Central Bank decided to keep interest rates unchanged yesterday(Sept.6),while the U.S.Federal Reserve Board may roll out third round of quantitative easing policy(QE3)at its interest policy meeting on September 12.The CBC is watching closely the international financial situation,as reference for policy decisions at the meeting of its board of directors and supervisors on September 20.

Presently,the CBC is still keeping a loose money situation in the market.Interbank call-loan interest rate has been keeping at low level for a while.To avoid extra funds flowing to the housing market and fueling realty speculation,the CBC will continue closely monitoring the credit-extension policy of banks,restricting share of housing loans and boosting housing-loan interest,to dampen resurgence of housing speculation.

Since banking realty loans have approached the ceiling,Land Bank of Taiwan will follow the step of Taiwan Cooperative Bank to raise housing interest rates.Su Lo-ming,president of Land Bank of Taiwan,reported yesterday that due to the limited remaining quota for housing loans,interest rates for housing loans will go up inevitably.

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