Taiwan’s central bank increased the amount of funds banks must hold in reserve to rein in the sizzling property market, while keeping its benchmark interest rate at the highest level in 16 years.
The monetary authority raised lenders’ reserve requirement ratio by 25 basis points at its quarterly meeting on Thursday. It also announced more targeted measures to try to address the rising cost of homes.
Central bank Governor Yang Chin-long said the RRR move — which follows a similar boost in June — would reduce bank liquidity by NT$125 billion ($3.9 billion).
The central bank left borrowing costs at 2%, a move that contrasts with a global shift toward rate cuts after the Federal Reserve lowered its benchmark interest rate by a half percentage point. All but one of the 29 economists surveyed by Bloomberg News predicted the hold.
The move by the Central Bank of the Republic of China, as the monetary authority in Taipei is officially known, to raise the RRR at the second straight meeting underscores its concern about property prices. Housing costs in the archipelago of 23 million people have risen for 23 straight quarters, according to government data, the longest run on record.
“It was a pretty hawkish message from the CBC,” said Michelle Lam, Greater China economist at Societe Generale. “The question though is whether the measures will work to curb the housing market and what more they could introduce.”
Yang said at a briefing after the CBC’s moves were announced that “we need more serious measures in special times.”
“We need to let the market know property prices won’t continue to surge,” he added.
Yang also said that the CBC is checking with 34 banks around Taiwan to rein in mortgage loans. Last month, the monetary authority met local banks to convince them to cool property-related lending, warning it was prepared to take action.
The CBC’s tighter home-buying rules included expanding a curb on the amount of money people can get for mortgages to buy second homes so that it is in effect around the archipelago. This marked the seventh time since the end of 2020 that the central bank moved to tighten selective credit controls — measures aimed at improving the quality of loans in a given sector.
Earlier this month, official data showed Taiwan’s consumer prices increased 2.36% in August, more than expected and drifting higher than the central bank’s 2% stated comfort level. Minutes of the central bank’s meeting in June later showed disquiet that rising rents were fueling inflation. –BLOOMBERG
