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.
With an approval rating of just two percent, Peruvian President Dina Boluarte might be the world’s most unpopular leader, according to pollsters. Protests greeted her rise to power 29 months ago, and have marked her entire term — joined by assorted scandals, investigations, controversies and a surge in gang violence. The 63-year-old is the target of a dozen probes, including for her alleged failure to declare gifts of luxury jewels and watches, a scandal inevitably dubbed “Rolexgate.” She is also under the microscope for a two-week undeclared absence for nose surgery — which she insists was medical, not cosmetic — and is
CAUTIOUS RECOVERY: While the manufacturing sector returned to growth amid the US-China trade truce, firms remain wary as uncertainty clouds the outlook, the CIER said The local manufacturing sector returned to expansion last month, as the official purchasing managers’ index (PMI) rose 2.1 points to 51.0, driven by a temporary easing in US-China trade tensions, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The PMI gauges the health of the manufacturing industry, with readings above 50 indicating expansion and those below 50 signaling contraction. “Firms are not as pessimistic as they were in April, but they remain far from optimistic,” CIER president Lien Hsien-ming (連賢明) said at a news conference. The full impact of US tariff decisions is unlikely to become clear until later this month
GROWING CONCERN: Some senior Trump administration officials opposed the UAE expansion over fears that another TSMC project could jeopardize its US investment Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is evaluating building an advanced production facility in the United Arab Emirates (UAE) and has discussed the possibility with officials in US President Donald Trump’s administration, people familiar with the matter said, in a potentially major bet on the Middle East that would only come to fruition with Washington’s approval. The company has had multiple meetings in the past few months with US Special Envoy to the Middle East Steve Witkoff and officials from MGX, an influential investment vehicle overseen by the UAE president’s brother, the people said. The conversations are a continuation of talks that
CHIP DUTIES: TSMC said it voiced its concerns to Washington about tariffs, telling the US commerce department that it wants ‘fair treatment’ to protect its competitiveness Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reiterated robust business prospects for this year as strong artificial intelligence (AI) chip demand from Nvidia Corp and other customers would absorb the impacts of US tariffs. “The impact of tariffs would be indirect, as the custom tax is the importers’ responsibility, not the exporters,” TSMC chairman and chief executive officer C.C. Wei (魏哲家) said at the chipmaker’s annual shareholders’ meeting in Hsinchu City. TSMC’s business could be affected if people become reluctant to buy electronics due to inflated prices, Wei said. In addition, the chipmaker has voiced its concern to the US Department of Commerce
RSS