Taiwan: Central Bank holds rates at last meeting of 2016
December 22, 2016
At its quarterly monetary policy meeting on 22 December, the Central Bank of the Republic of China (Taiwan) (CBRC) maintained its discount rate at 1.375%. This was the second consecutive quarter in which the Bank has left the main monetary policy unchanged, following an easing cycle that began in Q3 2015. The Bank’s decision was widely anticipated by the markets as the Taiwanese economy has been in good health since the summer of 2016, but its pace of growth is not expected to be strong enough in 2017 to prompt the Bank to tighten the reins.
The CBRC also confirmed its policy of maintaining an orderly foreign exchange rate market, stating that diverging monetary policy across the developed world had "induced erratic cross-border capital movements which could potentially heighten volatility in global financial markets." Most analysts surveyed by FocusEconomics agree that the Bank’s decision to keep its main monetary policy rate unaltered for now reflects the fact that the Monetary Authority is keen to maintain ample liquidity in the domestic market at a time when the economy still needs more funds to move ahead.
The latest economic data signal that Taiwan’s economic activity improved in the final quarter of 2016. The Bank noted that in light of a gradual recovery in domestic demand, it has maintained its accommodative monetary stance, although it will continue to closely monitor global situations—such as the economic policies of the new U.S. administration, China’s economic rebalancing and geopolitical uncertainties—in order to adjust the interest rate.
Author: Ricardo Aceves, Senior Economist