The move, which put the benchmark discount rate at 2.75 percent, the lowest level since March last year, came after the world's leading economies agreed on the need to take measures to spur growth.

It also came days after the European Central Bank and the Bank of England slashed rates.

Taiwan's central bank made the decision after the technology-reliant island's October exports, a key driver of economic growth, posted their biggest annual fall in 3 years and annual inflation for the same month dropped to a one-year low.

ADVERTISEMENT

The latest interest rate take effect today.

"We decided that we have to take action after looking at inflation data, IMF forecasts and export figures over the past week," central bank governor Perng Fai- nan said.

"The central bank's job is to control inflation. Once that's achieved, we'll have to take a look at economic growth."

The International Monetary Fund said last Thursday that the developed world, the destination of many of Taiwan's export products, faced a full- year contraction in 2009, the first since World War II.

On Friday, the government said Taiwan's exports had fallen by an annual 8.3 percent, worse than market expectations as demand from the United States and China declined sharply.

Perng said he was unsure whether Taiwan faced a recession, having said in October there was no recession risk.

The market expected the surprise rate cut to give an added boost to Taiwan's stock market today after US stocks ended 2.9 percent higher on Friday.

REUTERS