The central bank may implement a limited rate cut next year, as the economy looks set to stabilize with inflation tamed, the latest report by Credit Suisse Group AG said yesterday.
“We maintain our expectation for the central bank to make one rate cut in 2013,” Credit Suisse research analyst Christiaan Tuntono said in the report.
The brokerage said it does not think the bank is in a rush to loosen monetary policy further at this point, with growth seeing cyclical stabilization.
However, the problem facing Taiwanese authorities now is how long growth will remain stagnant, instead of how sharply growth will decrease, Tuntono said.
Meanwhile, the brokerage does not think inflation will be an issue for Taiwan next year and maintained its expectation of a moderate 2 percent growth in headline inflation next year.
Credit Suisse sees pressure on the government and the central bank to provide further policy support until the global economy shows more visible improvement.
The brokerage maintained its forecast for Taiwan’s GDP growth next year at 3.4 percent, higher than the 3.15 percent estimated by the government. It believes growth momentum will improve next year from this year, based on its expectation of stabilization in the pace of sequential growth next year.
Credit Suisse set its growth forecast for 2014 at 3.4 percent, the report’s data showed.
For this year, the brokerage expected growth in the fourth quarter to improve, with momentum persisting through the first quarter of next year.
Better industrial production — driven by a pickup in the electronic and information and communications technology (ICT) sectors — should drive the uptick, the report said.
On inflation, Credit Suisse said it expects annual growth of headline inflation this month to moderate further, on a higher statistical base in December last year and muted price pressure.
With growth momentum stabilizing, inflation is still likely to stay below trend for next year, restraining the rise in demand-pull price pressure, it added.
Private think tank Yuanta-Polaris Research Institute (元大寶華研究院) also said yesterday that inflation would not pose a threat to the economy this year.
The institute said annual growth in headline inflation this month may continue to fall for the fourth month in a row to less than 1 percent, slowing from the 1.59 percent recorded last month.
The moderate growth in inflation this month may help the consumer price index stay under 2 percent this year, Yuanta-Polaris said in a research note.