The nation’s central bank yesterday kept its benchmark interest rates at the current low level on concerns the economy remains sluggish, though the downturn bottomed out in the first quarter.
The top monetary regulator has left rates unchanged since February, when it cut the discount rate for the seventh time in six months to 1.25 percent.
“The board decided not to adjust the interest rates now that global financial markets have regained stability and economic woes have declined,” central bank Governor Perng Fai-nan (彭淮南) told a press conference.
The rates on collateralized loans will stay at 1.625 percent and 3.5 percent on unsecured loans, Perng said.
FORECAST
He said the economy, which contracted 10.24 percent, will recover growth in the fourth quarter, based on a statistics agency forecast.
“In fact, GDP is expected to turn positive this quarter from the earlier quarter,” Perng said, adding that the economy will have to wait until mid-2011 to return to the pre-recession level.
The governor dismissed inflationary pressure, saying that commodity prices would remain stable in light of weak demand even though fuel and raw material costs picked up considerably in recent weeks.
Perng said the central bank would respect the market mechanism regarding the value of the local currency but would not rule out intervention to stem irregular activities such as an influx of speculative money.
DIFFERENT MOVES
Liang Kuo-yuan (梁國源), president of Polaris Research Institute (寶華綜合經濟研究院), said the central bank would maintain its current monetary policy unless its counterparts in major countries make different moves.
“A rate change too early or too late will discount the efforts to bail out the economy,” Liang said. “The central bank will take cues from the global trend when weighing its next steps as the nation’s small and open economy is susceptible to external influence.”
Cheng Cheng-mount (鄭貞茂), head economist at Citigroup Taiwan Inc, expressed similar views, saying the central bank is unlikely to adjust interest rates before the first half of next year.
However, Cheng said the agency should watch out for money aggregates readings now that the broad M2 measure has exceeded its target range of between 2.5 percent and 6.5 percent for this year.
The gauge increased 7.35 percent year-over-year last month on capital inflow while the narrow M1B gained 12.95 percent as more funds flowed from time deposits to demand saving accounts, the central bank data showed.
“The central bank should take steps to absorb excess capital,” Cheng said by telephone.
Stock and currency markets are unlikely to witness drastic fluctuations today as investors had expected the central bank to keep the rates untouched, analysts said.
EXCESS CAPITAL
Eric Lai (賴建承), an analyst at Marbo Securities Consultant Co (萬寶證券投顧), said the local bourse had grown inured to excess capital that helped push up the TAIEX by 40.65 percent this year.
A currency dealer at a local bank said the NT dollar would remain stable in the short term after the central bank reiterated its dislike for excessive fluctuations.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by