The nation's central bank may not follow the US Federal Reserve if it raises interest rates, governor Perng Fai-nan (
"Monetary policy decisions should be country-specific," Perng said in a written response to questions from Bloomberg News during the annual meeting of the Asian Development Bank (ADB). "Cross-country synchronization of monetary policy is not necessarily desirable."
The central bank usually keeps its interest-rate policy in line with that of the Fed, cutting the benchmark interest rate to a record-low 1.375 percent in 15 reductions between December 2000 and June last year.
Asia's major currencies fell to their lowest levels against the US dollar in months amid speculation the US Federal Reserve would raise interest rates as soon as next month.
The New Taiwan dollar, which has weakened 2.2 percent against the greenback in a month, closed down NT$0.042 at NT$33.663 last Friday on the Taipei foreign exchange market.
"The exchange rate is determined in principle by market forces," Perng said. "The central bank will step in, however, when the market is disrupted by seasonal or irregular factors, to maintain the dynamic stability of the exchange rate."
Perng arrived in Jeju on Wednesday at the head of an 11-member delegation of senior government officials to attend the annual meeting of the ADB's board of governors, which began Saturday and ends today.
Members of Perng's delegation include presidential advisor Jeffrey Koo (
In a statement issued to the meeting yesterday, Perng said Taiwan's economic growth rate stood at 3.24 percent last year and this year's growth rate is projected at 5.41 percent.
"Economic activity accelerated in the first quarter and is expected to gather momentum over the remainder of the year," Perng said. "Inflationary pressures have been weak in the recent past and are anticipated to remain subdued for the foreseeable future."
The nation's consumer price index (CPI), a measurement for inflation, fell by 0.28 percent over the four quarters of last year, but the bank forecast the CPI would run somewhat higher this year at around 0.83 percent.
"The central bank is rather more interested in core inflation," which generally excludes volatile fuel and food prices, Perng said. "By our own estimate, core inflation is expected to be around 0.5 percent this year."
The governor yesterday also reiterated that Taiwan has embarked on a series of financial reforms since 2001, including adopting many measures to help its banks deal with their non-performing loans (NPL), in response to an ADB report last month that warned that Taiwan and other Asian countries appear to be at risk of a financial crisis.
"The NPL ratio of our domestic banks declined sharply from a peak of 8.26 percent in November 2001 to 3.82 percent in April 2004, a reduction of almost half of the NPLs," Perng said in the statement.
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