Taiwan: Central Bank stays put in June
June 25, 2015
At its 25 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 almost four years. The Bank’s decision was on par with market expectations.
In its accompanying statement, the Central Bank pointed out that while economic activity in the euro area and Japan has shown signs of picking up, China’s growth has weakened. The Bank added that uncertainties in the global economy linger amid a possible increase in interest rates by the Fed and rising risks over the Greek debt negotiations. Further, volatile international capital movements have occurred that pose a risk to international financial markets and the global economy.
Regarding Taiwan, the Central Bank stated that China’s slowdown, combined with moderate global demand, dampened export growth in Taiwan. However, the global economy is expected to accelerate in the second half of 2015 and domestic demand is anticipated to record modest growth support by an improving labor market. Regarding price developments, the Central Bank recognized that inflation has fallen amid low oil prices and that consumer prices have decreased annually for the first five months of 2015. However, inflationary pressures are expected to rise by year end as the base effect of low energy prices fades.
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.” In addition, the Central Bank stated that Taiwan’s economy has improved steadily and that inflation outlook is anticipated to improve gradually. Against this backdrop, the Bank decided to maintain the discount rate unchanged, adding that, “a policy rate hold will help maintain price and financial stability and foster economic growth.”