Mon, Feb 05, 2018 - Page 15 News List

Central bank’s minutes show support for rate cut

IDEA FLOATED:One board member said ‘there seemed to be room for a rate cut,’ as other nations’ rates are lower. Another said that a cut ‘might be put on the table next year’

By Crystal Hsu  /  Staff reporter

The central bank on Thursday released the minutes of its Dec. 21 last year board meeting, revealing that most directors favored extending the “status quo,” but some floated the idea of a rate cut to stimulate GDP growth.

All members rallied behind the decision to leave interest rates unchanged after exchanging views, the 49-page report showed.

The bank’s policy-setting board includes 15 directors and five supervisors. The board of directors is the highest decisionmaking body, whereas the board of supervisors is authorized to examine the bank’s assets and liabilities, as well as audit its accounts.

The minutes showed that several directors and supervisors voiced support for a rate cut to help boost GDP growth, which has been modest in the past few years.

“Since the real interest rate in Taiwan is higher than the rate in most major economies, there seemed to be room for a rate cut,” the minutes quoted one director as saying, without identifying them.

Another director said that while the current situation warranted the extension of an interest rate hold, a rate cut could provide an economic boost, the minutes showed.

One supervisor said exploring the option of a rate cut might be harmless, considering the nation’s muted economic growth and positive real interest rates, the minutes showed.

However, another supervisor disagreed, saying that the timing was not right for a rate cut in light of increases in raw material prices.

“It is more appropriate to keep rates unchanged for now... Interest rate adjustments might be put on the table next year, depending on economic and financial developments at home and abroad,” the report quoted the supervisor as saying.

Commenting on rate hikes in the US, the UK and South Korea, several directors and supervisors expressed their view that Taiwan does not need to follow suit, given that its economic, financial and price conditions are different.

One director pointed out that the US was already close to full employment, whereas Taiwan’s output gap remained negative.

Taiwan has a mild inflation outlook, the same director said, adding that the nation has experienced an appreciation of the NT dollar and the ensuing financial tightening.

“A policy rate hike could result in further currency appreciation, and exchange rate movements have important effects on Taiwan’s economy,” the director said.

Central bank Governor Perng Fai-nan (彭淮南), who is to retire later this month after spending nearly two decades at the bank, made similar statements at a news conference following the December meeting.

The report said all board members eventually voted unanimously to keep the rediscount rate at 1.375 percent, the rate on accommodations with collateral at 1.75 percent and the rate on accommodations without collateral at 3.625 percent.

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