Dong Ruibin: Inflation Pressure Persists, but Essentially No Need for U.S. Rate Hikes

(CNA reporter Lu Yan-ci, Taipei, June 11) The U.S. Consumer Price Index (CPI) rose 4.2% year-on-year in May, the highest in three years. Although core CPI was below expectations, market expectations for rate hikes remain strong. Dong Ruibin, executive director of Taiwan's Central Bank and chairman of Mega Financial Holding, stated today that while inflationary pressure persists, he fundamentally sees no need for the U.S. to raise interest rates.

In a March interview this year, Dong noted that the U.S. Federal Reserve (Fed) uses two key indicators for monetary policy: whether the Personal Consumption Expenditures (PCE) price index exceeds 2%, and whether the unemployment rate surpasses 4.1%.

He explained that if inflation exceeds the target and unemployment falls below the threshold, a monetary tightening policy is adopted; if inflation is below target and unemployment exceeds the threshold, monetary easing is pursued. However, if both inflation and unemployment exceed their respective targets, neither monetary nor fiscal policy can effectively resolve the situation.

Speaking today as chairman of the Banking Association at a seminar on ground lease housing loans hosted by the association, Dong reiterated that inflationary pressure remains, but his view remains unchanged: the U.S. essentially does not need to raise rates.

On housing issues, Dong pointed out that not only young people but also older individuals cannot afford homes. He suggested exploring the possibility of using ground lease housing as retirement homes, offering an alternative amid soaring property prices.

Sharing practical experience, Dong noted that Mega Bank currently handles ground lease housing loans in two ways. First, developers win bids for ground lease land, build properties, and then individual buyers apply for unit-by-unit mortgage loans. In Taipei, there are about two dozen such cases. Second, cases where construction financing is not provided by Mega Bank, but individuals directly apply for loans. In these cases, loan-to-value ratios are typically around 70%, with terms up to 30 years depending on the project, and interest rates slightly higher than standard first-homebuyer loans, around 2.9%.

Lin Jui-hao, General Manager of Haiwo Creative Marketing, stated during the seminar that according to statistics from the Ministry of Finance's State Property Administration, 2,222 ground lease housing units nationwide have successfully obtained bank loans—over 80% of such cases—with as many as 23 financial institutions actively participating. This indicates a significant increase in banks' acceptance and confidence in ground lease housing products.

Chang Neng-cheng, Director of Jubing Real Estate Appraisers, noted that valuation of ground lease housing primarily considers the benefits derived from land use or is estimated based on market transaction levels. As the remaining lease term decreases, the property value depreciates accordingly, prompting financial institutions to be more cautious in determining loan-to-value ratios. (Edited by Yang Kai-xiang) 1150611