Taiwan’s central bank is in no rush to cut interest rates as its South Korean peer did earlier this month, even though both governments have introduced stimulus packages to prop up their economies, Credit Suisse AG said.
Whether the central bank is in favor of lower interest rates will be contingent upon a further worsening of the local economy and a shift into a more dovish stance by its board members, Christiaan Tuntono, a Hong Kong-based economist at Credit Suisse, said in a note yesterday.
Tuntono’s remarks came after the Cabinet unveiled its economic stimulus package yesterday. His view echoed HSBC Greater China economist Donna Kwok (郭浩庄), who said on Friday that the central bank is unlikely to cut rates any time soon, with monetary conditions still loose.
“There are several points that make Taiwan different from [South] Korea,” Tuntono said.
He added that the nation’s policy rate is already lower than South Korea’s and Taiwan’s growth is not bad enough to force the central bank to cut rates now.
On May 7, South Korea’s parliament approved 17.3 trillion won (US$15.4 billion) of stimulus spending through an extra budget, two days before its central bank announced it was cutting the benchmark interest rate by a quarter percentage point to 2.5 percent to boost the country’s export-reliant economy.
At that time, Bank of Korea Governor Kim Choong-soo was quoted by The Associated Press as saying that the interest rate cut, the bank’s first reduction in seven months, was intended to “maximize the effect of the extra budget.”
PRESSURE
Tuntono said Taiwan’s central bank might be under more pressure to ease its monetary policy now than before, but the chance for a rate cut this year was still low.
That is because Taiwan’s policy rate of 1.875 percent is already lower than South Korea’s 2.5 percent, he said.
GDP GROWTH
Taiwan’s GDP is forecast to expand 2.4 percent this year, after growth of 1.25 percent last year, and the government expects the economy to pick up pace in the second half of this year.
“We do not believe the pressure on the central bank to cut the interest rate is strong enough now, unless there are more signs indicating that growth [this year] will be even worse than last year,” Tuntono said.
Moreover, policymakers in Taiwan are still wary about rising property prices and have plans ready to ward off speculative investors from entering the local property market.
“This makes easing the monetary policy stance difficult at this stage,” Tuntono said.
HORMUZ ISSUE: The US president said he expected crude prices to drop at the end of the war, which he called a ‘minor excursion’ that could continue ‘for a little while’ The United Arab Emirates (UAE) and Kuwait started reducing oil production, as the near-closure of the crucial Strait of Hormuz ripples through energy markets and affects global supply. Abu Dhabi National Oil Co (ADNOC) is “managing offshore production levels to address storage requirements,” the company said in a statement, without giving details. Kuwait Petroleum Corp said it was lowering production at its oil fields and refineries after “Iranian threats against safe passage of ships through the Strait of Hormuz.” The war in the Middle East has all but closed Hormuz, the narrow waterway linking the Persian Gulf to the open seas,
Nanya Technology Corp (南亞科技) yesterday said the DRAM supply crunch could extend through 2028, as the artificial intelligence (AI) boom has led the world’s major memory makers to dramatically reduce production of standard DRAM and allocate a significant portion of their capacity for high-bandwidth memory (HBM) chips. The most severe supply constraints would stretch to the first half of next year due to “very limited” increases in new DRAM capacity worldwide, Nanya Technology president Lee Pei-ing (李培瑛) told a news briefing. The company plans to increase monthly 12-inch wafer capacity to 20,000 in the first half of 2028 after a
Taiwan has enough crude oil reserves for more than 100 days and sufficient natural gas reserves for more than 11 days, both above the regulatory safety requirement, Minister of Economic Affairs Kung Ming-hsin (龔明鑫) said yesterday, adding that the government would prioritize domestic price stability as conflicts in the Middle East continue. Overall, energy supply for this month is secure, and the government is continuing efforts to ensure sufficient supply for next month, Kung told reporters after meeting with representatives from business groups at the ministry in Taipei. The ministry has been holding daily cross-ministry meetings at the Executive Yuan to ensure
RATIONING: The proposal would give the Trump administration ample leverage to negotiate investments in the US as it decides how many chips to give each country US officials are debating a new regulatory framework for exporting artificial intelligence (AI) chips and are considering requiring foreign nations to invest in US AI data centers or security guarantees as a condition for granting exports of 200,000 chips or more, according to a document seen by Reuters. The rules are not yet final and could change. They would be the first attempt to regulate the flow of AI chips to US allies and partners since US President Donald Trump’s administration said it rescinded its predecessor’s so-called AI diffusion rules. Those rules sought to keep a significant amount of AI
RSS