The nation’s money supply growth accelerated last month because of continued capital inflows, the central bank said on Friday.
M2, the broad measure of money supply that covers cash in circulation and all deposits, was up 1.75 percent last month compared with a year earlier, following an annual increase of 1.43 percent the previous month and indicating an improved momentum in capital, central bank data showed.
The data also showed that M1A money supply last month rose 0.5 percent year-on-year and M1B money supply declined 1.45 percent year-on-year.
“Compared with the previous month, the M1A, M1B, and M2 growth rates were all higher mainly because of steady net capital inflow,” the central bank said.
But the monthly increase of 1.75 percent in M2 money supply last month still fell below the central bank’s annual target of between 3 percent and 7 percent for this year. For the first three months of the year, the average M2 money supply only showed an increase of 1.41 percent, the bank’s data showed.
“Slower M2 growth and rising inflation pressure suggest that the central bank will likely loosen up its open market operation and allow more room for the NT dollar to appreciate,” Cheng Cheng-mount (鄭貞茂), an economist at Citi Investment Research, wrote in a note to clients on Friday.
Taiwan is facing inflationary pressures as the consumer price index climbed 3.96 percent last month from a year ago, after an annual rise of 3.87 percent in February and a growth of 2.94 percent in January, the Directorate General of Budget, Accounting and Statistics reported on April 7.
To help stem inflation, the central bank has allowed the NT dollar to appreciate gradually since the beginning of the year and raised its benchmark interest rate for the 15th straight quarter on March 28.
The NT dollar has seen its value rise 6.49 percent against the US dollar this year and closed at NT$30.34 on the Taipei Forex Inc on Friday. The benchmark TAIEX has also advanced 5.19 percent over the same period and closed at 8,947.83 points on Friday because of increased capital inflows to invest in NT dollar-denominated assets and the local equity market.
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