Taiwan: Central Bank stays put in March
March 26, 2015
At its 26 March 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 over the last three years. The Bank’s decision was on par with market expectations.
The Central Bank pointed out that while economic activity in the US and euro area has improved since the beginning of 2015, China’s growth has continued to weaken and Japan’s remains lackluster. Further, uncertainties in the global economy linger amid a possible increase in interest rates by the Fed and volatile oil prices. Nevertheless, the Central Bank points out the low oil prices will help boost private consumption and that it foresees a similar pick-up in private investment.
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 two months of 2015. However, inflationary pressures are expected to rise by year end.
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 is stable. 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.” Looking forward, the Bank commented that it will “undertake appropriate monetary policy actions with flexibility.”.