Interest rates

Taiwan says interest rates will not be used to influence property prices

Taiwan’s central bank governor Yang Chin-Long reiterated that interest rates will not be used to influence house prices, saying the cost of doing so would outweigh the benefits.

Policymakers will raise borrowing costs when the time is right, which will impact house prices and help make targeted credit control measures more effective, Yang said in a speech posted on the website of the central bank. Interest rates should not be adjusted based on the prosperity or decline of a single industry, and should be used to stabilize the overall economy, he said.

In the January edition of The Taiwan Banker magazine, Deputy Governor Chen Nan-kuang said the central bank should consider adjusting interest rates to rein in the housing market, contrary to Yang’s earlier comments. Chen said loose monetary policy is one of the main reasons for rising house prices and interest rates should be included as one of the policy tools to keep prices under control.

He added that the central bank should evaluate its policies and take necessary measures as soon as possible when dealing with house prices and should stop using “high house prices cannot be solved by a single department” as an excuse. Adjusted for inflation, house prices in Taiwan have risen more than 160% over the past 20 years, far more than the 45% gain in South Korea and 64% in the United States respectively, according to Chen. .

The central bank has kept borrowing costs unchanged at a record high since 2020, although some economists expect rate hikes this year. Yang also said last month that a rate hike was likely in 2022.

In his speech, the governor said recent selective credit controls put in place to rein in the housing market were broader, more diverse and stronger than previous measures. Interest rate hikes will only be considered to keep up with inflation, balance the economy’s recovery from the impact of the Covid-19 pandemic and as major economies increase borrowing costs.