Deutsche Bank warned yesterday of looming deflation in Taiwan amid a global economic slowdown, which would in turn lead to an end of interest rate hikes after one more increase this quarter.
"Deflation is a more pressing threat than inflation to Taiwan and some other Asian countries like Singapore," Michael Spencer, Deutsche Bank's chief economist and head of global markets research in Asia, told a media briefing in Taipei yesterday.
Taiwan's falling terms of trade has generated the deflation -- which in turn is the result of declining export prices and tighter margins, Spencer said.
Consumption and investment have weakened for the past few quarters and could also contribute to the deflationary risk, he said.
The core consumer price index (CPI), an inflation indicator that excludes food and energy prices, may reach no higher than 1 percent this year and close to zero percent next year, Spencer forecast.
For the first half of this year, Taiwan saw a headline CPI of 1.43 percent and a core CPI of 0.58 percent, according to government data.
Against this backdrop, the nation's central bank is expected to follow the lead of its US counterpart and cease raising interest rates after one more hike of 12.5 base points next month, Spencer said, and added that the bank could start cutting rates in the second quarter of next year.
The economist said the US Federal Reserve (Fed) would pause after lifting the Federal fund rate to 5.5 percent at a board meeting slated for next week, putting an end to the current cycle of tightening started in June 2004.
The Fed would then lower interest rates twice by 25 base points in May and June next year respectively as the US economy further softens.
Deutsche Bank forecast that US economic growth would slow to 2.3 percent next year, down from 3.1 percent this year, which would in turn drag down Asian economies that heavily depend on US demand.
The bank expected Taiwan's economic growth to correspondingly decelerate to 3.5 percent next year from 4.2 percent this year.
Spencer predicted that oil prices -- which have skyrocketed this year on tighter supply and increasing demand -- would moderate in the fourth quarter of next year with the average price of a barrel falling to US$55. Oil is currently retailing at around US$69 per barrel.
The global economy would not climb out of the down cycle until 2008, Spencer said.
On the currency front, the NT dollar is expected to mildly appreciate in the next 12 months, boosted by a strengthening Japanese yen and the yuan, the bank said.
Deutsche Bank forecast the NT dollar would rise to NT$32 against the greenback by year's end and hit NT$31.5 midway through next year. Meanwhile, the Japanese and Chinese currencies would jump to ?96 and 7.75 yuan respectively the bank said.
From the customer’s perspective, car rental is a straightforward business. The only uncertainty is whether the hire company will charge you for the scratch they discover when you hand back the vehicle. Hertz Global Holdings Inc’s bankruptcy protection filing on Friday last week was a reminder that today even the simplest business models are underpinned by a lot more financial complexity than meets the eye. The proximate cause of Hertz’s demise was of course the sudden collapse in bookings caused by COVID-19 travel restrictions. The company’s monthly revenue last month fell 73 percent year-on-year, a shortfall that even the most resilient
Uber Technologies Inc, Lyft Inc and Airbnb Inc have slashed thousands of jobs. Salesforce.com Inc and Visa Inc are letting employees work remotely for months; Twitter Inc and Square Inc are allowing them to do so for good. For the companies’ hometown of San Francisco, the moves are early signs of a dire blow. In a city with a long history of booms, busts and natural calamities, the COVID-19 pandemic has suddenly upended nearly a decade of prosperity. While municipalities across the US are grappling with economic fallout from the virus, San Francisco stands to take a deeper hit given its high
BULK PURCHASE: The French chain and Hong Kong-based Dairy Farm International reached a deal covering 224 stores, which is expected to be finalized by year’s end Carrefour SA yesterday announced it would acquire Wellcome Taiwan Co (惠康百貨) for 97 million euros (US$108.33 million), and bring all the Wellcome supermarkets (頂好超市) and Jasons Market Place stores nationwide under its banner within 12 months of the deal closing. The France-based hypermarket chain reached an agreement with Hong Kong-based Dairy Farm International Holdings (牛奶國際控股), the pan-Asian retailer that launched Wellcome Taiwan in 1987. The transaction involves 199 Wellcome supermarkets, which have average sales areas of 420m2 and 25 high-end Jasons Market Place stores, which have an average sales area of 820m2, as well as a warehouse in Taoyuan, Carrefour Taiwan (家樂福)
‘ONE-STOP SHOP’: A Miaoli official said that the factory in the Jhunan section of the Hsinchu Science Park would create more than 1,000 jobs and boost prosperity A new high-end IC packaging and testing plant planned by contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) in Miaoli County is expected to start operations in the middle of next year, Miaoli County Commissioner Hsu Yao-chang (徐耀昌) said. Hsu wrote on Facebook that TSMC, the world’s largest pure wafer foundry operator, would invest NT$303.2 billion (US$10.1 billion) to build the plant, the largest-ever single investment in Taiwan. However, TSMC declined to disclose the financial terms of the deal, while a company board meeting on May 12 approved a spending plan worth NT$168.2 billion as part of its investment plans. Construction of the