While the nation's monetary policymaker has not aggressively raised the benchmark interest rate as some economists had predicted, it will continue to tighten fiscal policy for the remainder of the year in order to fight inflationary pressures, analysts said yesterday.
The central bank announced yesterday it was raising the discount rate by 12.5 basis points to 3.625 percent, its 16th consecutive quarterly increase since October 2004.
In addition, the central bank announced it was lifting the reserve requirements for passbook deposits by 1.25 percentage points and the reserve requirements for time deposits by 0.75 percentage points, in a bid to curb excessive liquidity in the banking system, the central bank said in a statement.
The central bank also adjusted downward its target zone for aggregate M2 money supply growth to a range between 2 percent and 6 percent for the remainder of the year, from its previous range of 3 percent to 7 percent to reflect diversified portfolio allocations and a decreasing demand for cash because of expectations of rising inflation.
The central bank “seems to be trying to convince the public that it is in top gear in the fight against inflation,” Citi Investment Research economist Cheng Cheng-mount (鄭貞茂) wrote in a research note yesterday.
Cheng had predicted a rate hike of 0.25 percent by the central bank before yesterday’s board meeting.
Central bank governor Perng Fai-nan (彭淮南) told a press briefing following the board meeting that the bank’s rates had reached a “neutral” level. It “hinted that future monetary policy will probably focus more on controlling the ‘quantity’ of money instead of focusing on the ‘price,’” Cheng wrote.
Like elsewhere in Asia, the latest rate increases by Taiwan’s central bank reflected a cross-border concern among regional monetary policymakers about upside inflationary risks on the back of rising oil and food prices.
The government’s latest consumer price index data showed inflation grew 3.71 percent year-on-year last month, following a rise of 3.85 percent in the previous month.
But inflation is likely to rebound significantly following the recent announcement of more fuel and electricity price increases and Deutsche Bank’s economics research unit yesterday predicted the central bank would “remain vigilant and maintain the tightening bias” until end of the year, it said in an e-mailed statement.
Cheng forecast that the central bank would implement two more rate increases of 0.125 percentage points following the board meetings in September and December.
Other tightening measures are also likely to materialize. Cheng said any additional measures could negatively affect domestic sentiment, especially on the stock market, in light of the increased global economic uncertainty. But the impact on the foreign exchange market would likely be more muted, he said.
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure