Taiwan aids struggling economy with interest rate cut

Taiwan's central bank lowered its key interest rate for the first time in four years yesterday to stimulate the island's slowing economy in the wake of sluggish demand from abroad.

Following the cut, announced after a much anticipated quarterly board meeting of the central bank, the discount rate was lowered from 1.875 per cent to 1.75 per cent.

The reduction of rates - the first for 16 quarters, since June 2011 - comes amid calls for substantial steps to lend a hand to the export sector, which is the major engine of the economy.

"Considering the slow recovery of the global economy and uncertainties facing it, slow domestic economic growth, negative export output, mild inflation and relatively high substantial rates, the board believed that lowering the discount rate should help the economy grow while maintaining domestic prices and banking stability," the central bank said in a statement.

Last month, Taiwan slashed its forecast for gross domestic product growth this year to a lower-than-expected 1.56 per cent, saying the economy was losing strength owing to weak demand from abroad and stiffer competition from mainland China in the technology sector.

The figure marked a steep fall of 1.72 percentage points from May when the Directorate General of Budget, Accounting and Statistics made the previous estimate.