Taiwan drains excess cash from financial system to control prices

Taipei: Taiwan's central bank is using open-market operations to drain excess cash from the nation's financial system, a bank official said, as policymakers seek to avoid excess liquidity fuelling asset prices.

The central bank has been issuing negotiable certificates of deposit to absorb cash, said the official, who spoke on condition of anonymity yesterday in Taipei. The bank, which holds its quarterly policy meeting on March 25, will maintain a loose monetary policy stance, the official said.

"The central bank may accelerate open-market operations to mop up excess liquidity on concern the funds are flowing into the property market and pushing up prices," said Ma Tieying, a Singapore-based economist at DBS Bank.

Home loans reached a record NT$4.93 trillion (Dh569 billion) in January and property prices in the capital, Taipei, surged 20 per cent last year as banks on the island of 23 million people cut mortgage lending rates to the lowest level since records began.

The central bank uses open-market operations to influence the amount of reserves and level of interbank call-loan market interest rates, the official said.

Taiwan stocks rose 0.1 per cent to close at 7,779.08 in Taipei. The local dollar was little changed at NT$31.847 against its US counterpart at 4pm close time, according to Taipei Forex Inc.

The Central Bank of the Republic of China (Taiwan) on March 8 told bankers to tighten lending and ensure the quality of home loans.