The central bank yesterday kept its rediscount rate unchanged at 1.375 percent for the 11th consecutive quarter, on concerns about an economic slowdown at home and abroad as the US-China trade dispute lingers.
“Growing uncertainty and persistent negative output gaps warrant an extended accommodative monetary policy to help support economic growth,” central bank Governor Yang Chin-long (楊金龍) told a news conference in Taipei after the bank’s quarterly board meeting.
The central bank trimmed its GDP growth forecast for this year from 2.33 percent to 2.13 percent, as the global economy might fare weaker than expected, which would in turn slow demand for Taiwanese exports.
Photo: Peter Lo, Taipei Times
As inflation is also easing, because international crude oil and raw material prices have lost steam due to weakening demand, the bank also slashed its growth estimate for the consumer price index (CPI) and core CPI to 0.91 percent and 0.78 percent respectively this year, lower than the increases of 1.05 percent and 0.93 percent it predicted in December last year.
However, the bank dismissed worries that the nation’s GDP would enter contraction this quarter, following four straight months of negative showing in exports.
The Directorate-General of Budget, Accounting, and Statistics last month projected a 1.82 percent GDP growth for the first quarter, despite a 2.81 percent contraction in exports during the same period, while foreign banking groups have said net external demand could receive a boost from a steeper downturn in imports.
Recent rallies on the nation’s bourses and capital repatriation from Taiwanese firms relocating from China might help bolster domestic demand, Yang said.
The government has lent a helping hand through domestic travel subsidy offers and purchases of energy-saving home appliances, he said, adding: “The economy might show improvement each quarter” this year.
The chance of monetary tightening appears unlikely going forward after US Federal Reserve indicated plans to quit offloading its assets in September, and the chances of rate cuts in the US are now bigger than rate hikes according market projections, he said.
Despite the dovish rhetoric, Yang said he would still keep credit control on luxury housing for fear that some capital repatriation might flow to the property market and threaten the financial sector’s stability.
Yang said he was comfortable with the fact that housing transactions increased modestly while prices held relatively steady.
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