The central bank does not plan to change its monetary policy any time soon as inflation remains benign and the state of the economy remains the same from the last time the bank’s board met, Governor Yang Chin-long (楊金龍) said on Wednesday.
The ongoing capital outflow might lend support to an easy monetary policy, although the US Federal Reserve and other central banks are normalizing interest rates.
“The central bank is unlikely to follow suit” after the Fed raised its policy rates by 25 basis points last month and hinted at two more rate increases later this year, Yang told the legislature’s Finance Committee.
Interest rate hikes are used to cool inflationary pressures, but the domestic scene looks about the same as last month, when the central bank decided to keep the rediscount rate unchanged at 1.375 percent for the seventh straight quarter, he said.
Inflation increased 1.54 percent in the first quarter, comfortably below the monetary policymaker’s 2 percent alarm.
The bank’s next board meeting is due in June.
Yang confirmed that capital outflows accelerated this month and might reverse net fund inflows in the first three months of this year if the trend persists.
“Capital outflows have probably exceeded US$3 billion this month,” he said in response to lawmakers’ questions.
That is set to mute net fund inflows of US$3.26 billion recorded at the end of last month.
Foreign investors have slashed holdings in local technology plays, especially firms in Apple Inc’s supply chain, after Taiwan Semiconductor Manufacturing Co (台積電) on Thursday last week gave a conservative sales guidance, citing a downward trend in high-end smartphone demand and volatile cryptocurrency mining.
The local bourse shed 4.4 percent over the past five sessions to close at 10,488.58 points yesterday, while the New Taiwan dollar weakened 1.24 percent against the US dollar to NT$29.705, according to Taiwan Stock Exchange and central bank Web sites.
Capital outflows were also likely to have been triggered by investors pursuing higher yields in other markets, Yang said.
Nonetheless, that would not prompt the central bank to change its interest rate policy, he said.
The central bank has repeatedly voiced concern over the nation’s negative output gap, saying it would achieve faster GDP growth if it makes better use of its capacity.
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