Taiwan central bank signals no rate rise this month

TAIPEI: Taiwan's central bank sees selective steps as effective in cooling house price rises in certain areas of the island, suggesting it is not likely to raise interest rates this month.

Investors have speculated that rising property prices in parts of Taiwan would trigger a move by the central bank when it decides on interest rates on March 25, though most have discounted the possibility of a rate rise as economic growth remains slow.

Governor Perng Fai-nan did not elaborate on what the measures might be in remarks to parliament at a regular meeting on March 17.

"I think the central bank is relying more on regulatory measures to control liquidity," said Frederic Neumann, an economist at HSBC in Hong Kong. "It keeps rates low for companies that want to invest but reduces access to mortgage loans to control speculation, making (buyers) put up cash."

He said the central bank is likely to continue addressing property prices through policies such as adjusting property taxes or tightening mortgage criteria.

The island's state-owned banks have already put restrictions on mortgage lending for properties above a certain value and on properties for investment at the prompting of the central bank.

Interest rates remain at a record low 1.25%, with the central bank saying at its last meeting in December that modest growth and a lack of inflationary pressures did not warrant a rate rise.

Recent data has shown exports rising sharply from slumps a year earlier, buoyed by Chinese demand for technology products such as flat-panel TVs, though the outlook for demand worldwide remains unclear and any improvement is likely to be modest.

Perng reiterated in his remarks that CPI remains in an acceptable range. CPI in February rose 2.35%, slightly above market expectations, though analysts put that down to Lunar New Year seasonal spending. -- Reuters