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M2 money supply growth exceeds target range again in August.

Taipei, Sept. 25, 2009 (CENS) -- Taiwan's M2 money supply grew 8.17% year-on-year in August, the fifth straight month for the broadly defined money supply to score growth exceeding the target zone set by the Central Bank of China (CBC), said the CBC yesterday (Sept. 24).

The growth rate dropped slightly by 0.16 of a percentage point from the July level but still surpassed the CBC's targeted growth range of 2.5-6.5%. Moreover, M1B money supply, or money supply in narrower definition, jumped 22.14% year-on-year in August.

Still, the board of directors of the CBC resolved to maintain the targeted growth range for M2 money supply, as well as the policy interest rates, unchanged yesterday. The discount rate, therefore, remains at 1.25% per annum.

M1B includes currency in circulation, checking deposit, passbook deposit, and passbook savings deposit, while M2 equals M1B plus time deposit, time savings deposit, and transference from postal deposit.

Perng Fai-nan, CBC governor, expected the CBC to maintain the existing loose monetary policy at least by year end, citing the stable price outlook for the coming three months. He denied that the loose monetary policy is causing trouble, noting that M2 money supply growth rate is actually staying at a proper level.

The CBE reported that after the adjustment of seasonal factors, M2 growth in August actually reached only 6.37%, still falling within the targeted range. It predicted that the nominal growth rate will fall back within the targeted range by November.

Meanwhile, Perng attributed the sharp M1B growth to massive foreign investments in the stock market. The stock market rally has triggered massive fund transference from time deposit accounts to demand deposit accounts. In August, outstanding banking time deposit decreased by NT$170 billion, while that of demand deposit jumped NT$130 billion to NT$8.8 trillion, a record high.

Perng stressed that the CBC will closely monitor the prices of various assets and spare no effort in keeping money supply within the targeted range, via such measures as open market operation.

((PL)) (GE)

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Publication:The Taiwan Economic News
Geographic Code:9TAIW
Date:Sep 25, 2009
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