Fri, Dec 22, 2017 - Page 12 News List

Central bank maintains its interest rate policy

By Crystal Hsu  /  Staff reporter

The central bank yesterday kept its policy interest rates unchanged for the sixth consecutive quarter, with the rediscount rate at 1.375 percent, and said GDP growth remains modest despite continued improvement, while global economic uncertainty lingers.

Yesterday was central bank Governor Perng Fai-nan’s (彭淮南) final quarterly board meeting before his retirement in February, and he took the opportunity to defend his monetary and foreign-exchange policies.

“I remember what I said… I am grateful for the opportunity to have worked at the central bank and grateful for the support of colleagues and the media for the past 20 years,” Perng said when asked if he would consider extending his service.

The 78-year-old assumed the helm of the central bank in February 1998 and has helped guide the nation through the 1997 regional financial crisis, the 2001 technology bubble, the 2008 global financial crisis and 2012 European debt crisis.

While extending the accommodative policy stance, Perng said interest rates at current levels are not low compared with other economies.

Last week, the US Federal Reserve raised interest rates as unemployment fell to record lows and real interest rates stayed in the negative zone.

It is unfair to blame monetary policies or foreign-exchange rates for the nation’s lackluster economy, inflation and wages, and growing housing unaffordability, Perng said.

The New Taiwan dollar increased 7.8 percent this year, but exports grew by a double-digit percentage because the global economy recovered faster than expected, driving up demand for Taiwanese goods, especially semiconductors, he said.

Critics have said Perng keeps the NT dollar weak with the nation’s massive foreign-exchange reserves to support exporters at the expense of other industries.

“Some went so far as to claim the foreign-exchange rate has to do with Taiwan’s low birth rate,” he said.

Perng lent support to government interventions in pushing wage hikes, saying the invisible hand does not always work.

However, the government should refrain from meddling with the free labor market, Taiwan Semiconductor Manufacturing Co (台積電) chairman Morris Chang (張忠謀) said last week.

Stagnant wages contribute to low inflation and not the other way around, Perng said, after trade group the Chinese National Association of Industry and Commerce (工商協進會) last week argued that point.

It is sensible to keep selective credit controls on luxury homes, as it would not greatly affect wealthy people, he said.

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