The central bank yesterday stood firm on its loose monetary policy stance for the 16th consecutive quarter — its longest streak without change — as the absence of inflationary pressure allows it room to help support the nation’s small and fragile economic growth.
Central bank Governor Perng Fai-nan (彭淮南) shrugged off a need for lower interest rates or a weaker currency, saying borrowing costs are cheap enough locally and that the New Taiwan dollar is more competitive than the won.
Perng made the remarks after the bank’s quarterly board meeting, in which it 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.
Exports and industrial outputs have stalled so far this year, due to a sluggish global recovery as Europe and Japan show signs of improvement, but China turns out disappointing, Perng said.
The mixed results leave the US the only main trading partner that has registered healthy demand for Taiwanese exports based on government data for the past five months.
China has cut dependence on imports of electronic components from 60 percent in 2000 to 35 percent last month, the central bank’s report said.
Taiwanese firms based in China have also increased purchases of materials from local suppliers to support Beijing’s effort to restructure its economy, the report said.
However, citing statistics from the Directorate-General of Budget, Accounting and Statistics, Perng said growth momentum would pick up in the second half of the year, making monetary stimulus unnecessary.
The nation’s low tax rates limit room for fiscal stimulus measures, though it might be wise for the government to raise public infrastructure spending to help energize the economy, the governor said.
As for the local currency, Perng said it is more competitive than its counterpart in South Korea, the nation’s main trade rival, both in terms of headline and effective foreign exchange rates.
The statement indicated that the central bank has no intention of weakening the NT dollar, as major technology firms have suggested doing to boost their bottom line.
For the first time, the central bank disclosed its own forecast of 0.81 percent for the nation’s core inflationary gauge this year, in a measured bid to defend its monetary policy stance.
The core consumer price index (CPI), which is more reliable for tracking long-term inflationary pressures because it excludes volatile items, affirms healthy consumer activity, Perng said, attributing negative CPI numbers so far this year to a sharp decline in international crude oil prices.
“Cheaper fuel costs means less money paid to foreign energy suppliers overseas and more savings for private consumption,” Perng said.
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