Economics
This is How Taiwan's Central Bank Can Support the Economy Without Cutting Rates
- It sells deposit certificates to control banks’ money
- Taiwan monetary authority adds cash back by selling fewer CDs
The Central Bank stands in Taipei.
Photographer: Maurice Tsai/Bloomberg
This article is for subscribers only.
With the policy interest rate stuck near a historic low and banks flush with cash, the central bank of Taiwan will likely continue with a rather more esoteric tool to guide money markets - central bank certificates of deposit.
These CDs are the main policy tool for Taiwan’s central bank to keep the liquidity in markets at a desired level. In its open market operations, the central bank sells them to commercial banks to subtract money from the market, and lets them mature when it wants to inject liquidity.