Taiwan Monetary Policy


Central Bank stays put in June

At its 26 June monetary policy meeting, the Central Bank of the Republic of China (Taiwan) left the discount rate unchanged at 1.875%, where it has been for the last three years. The Bank’s decision was on par with market expectations.

The Central Bank pointed out that global economic activity has continued to show weakness and that it has been dragged down by a slowdown in emerging economies. In contrast, the Bank recognized that growth in developed economies, particularly in the United States, is still strong. The Bank sees that the European Central Bank’s recent announcement of further monetary easing will strengthen the recovery in the common-currency area. Domestically, the Central Bank stated that Taiwan’s exports continued to grow, although at a steady pace and that investment is showing signs of strong growth, which bodes well for Q2 GDP. In addition, monetary authorities emphasized that labor conditions have continued to improve.

Regarding price developments, the Central Bank recognized that inflation began to rise in March, mainly due, “to adverse supply-side factors such as infected piglets and unfavorable weather conditions leading to food prices to increase.” Nonetheless, the Bank sees the inflation outlook for this year remaining stable, although some risks persist. Such risks are mainly the result of monetary policy stances in the United States and the Eurozone—which are likely to have an impact in global financial markets going forward—and geopolitical tension in Ukraine and in the Middle East.

The Bank concluded that authorities continued to manage market liquidity through open market operations in order to maintain banks’ excessive reserves “at an appropriate level” and that, “a rate hold is conductive to maintaining price and financial stability as well as economic growth.”

Focus Economics Consensus Forecast panelists see the discount rate at 1.95 % in 2014. For 2015, panelists expect the discount rate at 2.25%.

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Taiwan Monetary Policy Chart

Taiwan Monetary Policy June 2014

Note: Central Bank Discount Rate in %.
Source: Central Bank of the Republic of China (Taiwan).

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