Economists yesterday forecast that interest rates would further trend down to 1 percent as early as March, but warned of a “liquidity trap” if the central bank continued its aggressive rate cuts.
“Cutting the rate to lower levels may backfire, forcing people to hold more cash,” Chen Miao (陳淼), a researcher at Taiwan Institute of Economic Research (台經院), said by telephone yesterday.
Keynesian economics warns that lowering interest rates to close to or equal to zero to avoid a recession may boost liquidity but not necessarily stimulate the economy. Borrowers may choose to keep assets in short-term cash bank accounts rather than making long-term investments, creating a liquidity trap. This may make a recession even more severe and can contribute to deflation.
Chen said the main problems facing the local economy were consumers drastically cutting back on spending, companies hesitating to take out loans for investment and banks refusing to extend credit.
A poll released by Global Views Survey Research Center (遠見民調) yesterday found that as many as 62 percent of respondents said they would spend the NT$3,600 vouchers that the government would start distributing to qualified individuals next Sunday on daily necessities and would refrain from over-spending, dealing a blow to the government’s goal of boosting consumption.
Wang Lee-rong (王儷容), director of the Chung-Hua Institution for Economic Research’s (中華經濟研究院) economic forecast center, also cast doubt on the wisdom of further cutting rates as the central bank had already lowered rates by 212.5 basis points in four months.
“The rate cut policy didn’t seem to help a lot,” she said.
Rate cuts have usually been followed by a rise in the stock market. However, the central bank’s rate cut on Wednesday failed to assure investors, who, spooked by the slump in the nation’s exports last month, drove the TAIEX down 5.3 percent to close at 4,535.79 points yesterday.
Wang said she did not foresee interest rates dropping below 1 percent as other pundits had suggested. She expects another 0.5 percentage-point cut in March amid worsening exports in the first quarter.
“An interest rate lower than 1 percent will cause panic — as if it’s the end of the world,” she said.
Agreeing that the nation’s rate will go down to 1 percent,
Arjuna Mahendran, head of HSBC private banking’s investment strategy in Asia, said interest rates could go down to 1 percent, but whether the central bank should cut rates even more aggressively would depend on the nation’s inflation outlook.
The banker said the consumer price index could fall into negative territory this year, which will leave the central bank no choice but to tackle deflation and “cut more to below 1 percent.” He did not give a timeframe for the expected rate cut.
Standard Chartered Bank said in a report yesterday that the central bank could slash its benchmark rate by another 0.25 percentage points in March and again in June and maintain it at 1 percent through the end of the year.
UBS AG predicted in an investment note yesterday that central bank would cut rates by 0.5 percentage points in March and another quarter point in June and leave it intact at 0.75 for the rest of the year.
Apple Inc increased iPhone production in India by about 53 percent last year and now makes a quarter of its marquee devices there, reflecting the US company’s efforts to avoid tariffs on China. The company assembled about 55 million iPhones in India last year, up from 36 million a year earlier, people familiar with the matter said, asking not to be named because the numbers aren’t public. Apple makes about 220 million to 230 million iPhones a year globally, with India’s share of the total increasing rapidly. Apple has accelerated its expansion in the world’s most populous country in recent years, bolstered
HEADWINDS: The company said it expects its computer business, as well as consumer electronics and communications segments to see revenue declines due to seasonality Pegatron Corp (和碩) yesterday said it aims to grow its artificial intelligence (AI) server revenue more than 10-fold this year from last year, driven by orders from neocloud solutions clients and large cloud service providers. The electronics manufacturing service provider said AI server revenue growth would be driven primarily by the Nvidia Corp GB300 server platform. Server shipments are expected to increase each quarter this year, with the second half likely to outperform the first half, it said. The AI server market is expected to broaden this year as more inference applications emerge, which would drive demand for system-on-chip, application-specific integrated circuits
Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) share of the global foundry market rose to almost 70 percent last year amid booming demand for artificial intelligence (AI), market information advisory firm TrendForce Corp (集邦科技) said on Thursday. The contract chipmaker posted US$122.54 billion in revenue, up 36.1 percent from a year earlier, accounting for 69.9 percent of the global market, TrendForce said. Its share was up from 64.4 percent in 2024, it said. TSMC’s closest rival, Samsung Electronics, was a distant second, posting US$12.63 billion in sales, down 3.9 percent from a year earlier, for a 7.2 percent share of the global market. In the
At a massive shipyard in North Vancouver, Canadian workers grind metal beams for a powerful new icebreaker crucial to cementing the country’s presence in the increasingly contested arctic. Icebreakers are specialized, expensive vessels able to navigate in the frozen far north. And “this is the crown jewel,” said Eddie Schehr, vice president of production at the Seaspan shipyard. For Canadian Prime Minister Mark Carney, who heads to Norway next Friday to observe arctic defense drills involving troops from 14 NATO states, Canada’s extreme north has emerged as a strategic priority. “Canada is and forever will be an Arctic nation,” he said ahead of
RSS