The state-run Bank of Taiwan (臺灣銀行) said yesterday that it would raise interest rates on Monday, following in the footsteps of the central bank, which announced an increase in official interest rates on Thursday.
The Bank of Taiwan will increase the interest rate on various time deposits and time savings deposits by 0.06 percentage points in response to the central bank’s move and to reflect the funding conditions of the market, the bank said in a statement posted on its Web site.
Under the new adjustment, the rate for one-year time savings deposits, for instance, will rise to 2.71 percent from 2.65 percent, bank figures showed.
While the bank is not changing its lending rates because of market competition, it will lower its demand deposits rates by 0.02 percentage points to reflect the central bank’s latest move in curbing excess liquidity in the banking system, the bank’s statement said.
The state-controlled Taiwan Cooperative Bank (合作金庫銀行) also announced that it would raised interest rates on various time deposits by 0.06 percentage points from yesterday.
Other major commercial banks, including Land Bank of Taiwan (土地銀行), Chang Hwa Commercial Bank (彰化銀行) and First Commercial Bank (第一銀行), are expected to follow Bank of Taiwan’s lead and raise their interest rates next week.
The central bank began lifting its discount rate for the 16th straight quarter by 0.125 percentage points yesterday to combat inflation. The discount rate charged to commercial lenders is now 3.625 percent.
Moreover, the monetary policymaker also decided to raise the reserve ratios for both checkbook and demand deposit savings accounts by 1.25 percent, as well as for time and fixed deposit savings accounts by 0.75 percent, effective from July 1.
With the central bank’s commitment to slow inflation, which is fueled in part by the sustained rise in international fuel and commodity prices, the bank is likely to raise rates further at its next boarding meeting.
“We expect the central bank to most likely hike again in September by another 12.5 basis points, which will lift the benchmark rediscount rate to 3.75 percent,” Tony Phoo (符銘財), the chief economist of Standard Chartered Bank (Taiwan) Ltd, wrote in a report released yesterday.
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