Keeping consumer prices steady remains the priority in monetary policy, rather than benefiting certain industries, the central bank said yesterday, after Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) chairman Morris Chang (張忠謀) said the strength of the New Taiwan dollar has weakened local firms’ global competitiveness.
Earlier yesterday, Chang said the comparative strength of the NT dollar against the South Korean won over the last four years has increased local electronic sector’s operation costs compared with their South Korean rivals.
In response, the central bank reiterated that supply-and-demand conditions are major factors determining the currency’s exchange rates.
Moreover, the NT dollar has seen a less volatile exchange rate over the past few years compared with the South Korean won.
Citing comments by Nobel Prize in Economics recipient Christopher Sims, the bank said in a statement that monetary policy should mainly be used to stabilize consumer prices, not to benefit a single industry.
In related news, M1B, a narrow measure of money supply in circulation, rose 3.35 percent from a year ago, up from a 2.73 percent increase in August, the bank said.
The broader M2 monetary aggregate increased 3.96 percent year-on-year last month, higher than the 3.69 percent growth posted in August, data showed.
“Net foreign capital inflows and the lower base produced by net foreign capital outflows in the same period last year helped raise the upturn in M1B and M2,” the deputy head of the central bank’s economic research department Chen E-dawn (陳一端) said.