Prospects for an interest-rate increase in Taiwan are fading fast after consumer prices began declining this year and more than 20 central banks eased monetary policy.
Four of 16 economists surveyed in the past week see the nation’s benchmark rate being raised this year, compared with 10 of 17 when Bloomberg last gauged expectations in December last year.
HSBC Holdings PLC this week became the first lender to forecast a cut, predicting the change would come at the central bank’s quarterly review today.
There were no other projections for a change at the coming meeting, a separate survey showed.
The impact of accelerating economic growth has been offset by a 51 percent drop in Brent crude since the end of June last year, which resulted in the first back-to-back declines in living costs in the past two months.
Looser monetary policy across emerging markets, including South Korea and India, has also eroded the case for Taiwan to boost interest rates, a move that risks strengthening the nation’s currency and hurting overseas sales.
“With inflation pressures so low, there is no rush for the central bank to begin rate normalization and risk choking the nascent economic recovery,” Katrina Ell, an economist at Moody’s Analytics in Sydney, said in an e-mail on Monday.
Depreciation pressure stemming from US tightening “will be welcome news for the nation’s policymakers, who place a high importance on a relatively low New Taiwan dollar to maintain export competitiveness,” she said.
The NT dollar has gained 1 percent against the greenback this year.
Foreign investors have pumped US$5.4 billion into local stocks this year and the government predicts economic growth will quicken to 3.78 percent, from 3.51 percent last year.
Consumer prices fell 0.19 percent last month from a year earlier following a 0.94 percent decline in January.
The nation has kept its benchmark discount rate at 1.875 percent since 2011.
Eleven of the 16 economists surveyed this month said they expect the rate to be left unchanged through this year; three projected a year-end level of 2.125 percent and one forecast 2 percent. HSBC saw two reductions to 1.625 percent by end-December, saying in a research note this week that the central bank would cut to prevent inflation expectations from falling.
Five-year sovereign bonds have rallied this year, pushing the benchmark yield down 10 basis points, or 0.1 percentage point, to 1 percent, as traders pared tightening bets.
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