11.08.2001
Central Bank cuts rediscount rate to 2.25%

• Following a 50bps cut in the US Fed's benchmark rate to 2.0%, Taiwan's Central Bank (CBC) reduced its rediscount rate by 25bps to 2.25%. We maintain there is ample room to further trim interest rates in Taiwan given bleak economic data, record unemployment and deflationary pressure that is keeping real interest rates high. The CBC hopes the cut will boost both consumer spending and loan growth. We believe that recovery in global demand rather than lower interest rates at home is what is required to revive domestic consumption and loan growth. Loans contracted 0.8% YoY in 3Q01 and we do not expect to see a reversal in negative growth until the economy picks up again, likely in 2H02.