The central bank yesterday extended its loose monetary policy stance for the 15th consecutive quarter, saying there is no need for adjustments either way, given the nation’s stable economy, ample liquidity and low inflation.
Governor Perng Fai-nan (彭淮南) declined to comment on the timing of policy changes, except to indicate that future monetary policy would be data-dependent.
Perng’s remarks came after the bank’s quarterly board meeting decided to keep the rediscount rate unchanged at 1.875 percent, the collateralized loan rate at 2.25 percent and the unsecured loan rate at 4.125 percent.
Inflationary pressures — the central bank’s topmost concern — have significantly eased since September last year, due to falling crude prices, Perng said.
The consumer price index (CPI) declined 0.56 percent in the first two months of the year and the inflationary reading might stay below the 1 percent mark for the whole of this year, he said.
However, the governor dismissed deflation concerns, saying that oil price distortions are temporary and may start to fade away in the second half of the year.
Core CPI, which is a more reliable inflationary indicator as it strips volatile energy and vegetable items, might approach 1 percent this year after registering 1.21 percent so far, Perng said.
The governor shrugged off the need for rate cuts as well, even though 26 nations, including China and South Korea, have done so to prop up their economy.
“Taiwan’s interest rate is lower than that in South Korea and there is already sufficient liquidity to support business activity,” he told a media briefing after the bank’s quarterly board meeting.
The latest GDP, unemployment and other economic data all suggest the economy is in good shape and monetary stimulus is therefore unnecessary, he said.
While hesitant to speculate on the timing of interest rate hikes by US Federal Reserve, Perng said the US central bank is likely to end its easy monetary cycle by the end of this year.
External factors will play a secondary role in Taiwan’s policy decisions, he said. The central bank traditionally follows Fed policy directions.
The New Taiwan dollar is likely to see drastic volatility this year, due to divided monetary policies worldwide, Perng said.
Perng added that his central bank colleagues would continue to “lean against the wind” operations to keep the NT dollar relatively stable.
The governor welcomed the Ministry of Finance’s property tax plans, saying the central bank has done its share to help end expectations of property price hikes through assorted credit controls.
The central bank’s policy is seen as appropriate, foreign banks said.
“Keeping interest rates at current levels is appropriate, as growth is not a big concern for Taiwan, given that the jobless rate has touched a 14-year low,” Hong Kong-based ANZ senior economist Raymond Yeung (楊宇霆) said in a note.
Standard Chartered Bank agreed, saying the central bank would maintain a pro-growth monetary stance and that future policy decisions would be data-dependent.
“As such, policymakers are likely to keep interest rates steady in the first half,” Standard Chartered economist Tony Phoo (符銘財) said.
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