There are likely to be no more interest-rate cuts for the rest of this year, as the risk of deflation recedes and exports post a tenuous recovery, Australia and New Zealand Banking Group Ltd (ANZ) said yesterday.
Instead, as the central bank’s rediscount rates are typically highly correlated with the US Federal Reserve’s rate, Taiwan is likely to see at least two interest-rate hikes next year, ANZ’s Hong Kong-based chief economist Raymond Yeung (楊宇霆) told a news conference.
The central bank, which has cut interest rates four times since September last year, is scheduled to hold its quarterly board meeting on Sept. 29, with market watchers predicting Taiwan’s monetary authorities will decide to stay put if the Fed’s policy-setting Federal Open Market Committee, which is to meet on Sept. 20 and Sept. 21, decides to raise rates.
The Taiwanese central bank’s benchmark rate is anticipated to reach 1.375 percent by the end of this year and 1.65 percent by the end of next year, Yeung said, adding that the bank would raise interest rates by 1 basis point by the end of next year.
Despite improving exports, Taiwan’s GPD growth is expected to remain a tepid 1 percent this year and 1.5 percent next year, due to sluggish momentum around the world, Yeung said.
The technology sector remains Taiwan’s greatest exports driver, but it remains to be seen whether momentum sustains throughout the second half, Yeung said, adding that market reception for Apple Inc’s iPhone 7 smartphones would be a pivotal indicator.
ANZ data showed that Apple’s share price has been highly correlated with Taiwan’s export orders since 2007.
Economic growth remains lukewarm around the world as major markets continue to undergo transitions, with primary drivers of growth shifting from goods to services, he said.
In particular, in the US, Europe and Japan — known as the G3 market — the shift toward services industries has continued to weaken the manufacturing and industrial sectors, perpetuating a supply glut, suppressing commodity prices and diminishing demand, he added.
Since “Brexit,” markets around the world are even more wary of “black swan” events that opinion polls and forecasts have failed to predict, Yeung said, referencing Republican US presidential candidate Donald Trump and the prospects of his incendiary foreign relations and immigration policies.
Regarding China, he downplayed long-running concerns about the country’s hard economic landing and mounting corporate debt.
“Consumption remains robust in China, and the situation might be more favorable than the data on hand indicates as metrics, have not been able to keep up with rapidly changing behaviors and preferences among consumers,” he said.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
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