The central bank yesterday kept its rediscount rate unchanged at 1.375 percent for the 12th consecutive quarter, as the global economy and trade flows slow, warranting a continued accommodative monetary policy.
The bank cut its GDP growth forecast for this year from 2.13 percent to 2.06 percent, as exports and private consumption have fared poorly, central bank Governor Yang Chin-long (楊金龍) told a news conference in Taipei after a quarterly board meeting.
The projection did not factor in US tariff hikes that are likely to be imposed on US$300 billion of Chinese goods if US President Donald Trump and Chinese President Xi Jinping (習近平) fail to end the trade dispute between the two countries at the G20 summit in Japan next week, Yang said.
“Downside risks have increased, with the US-China trade talks playing a critical role in shaping the economic landscape,” Yang said.
The tariff hikes would extend to consumer electronics and hurt Taiwan’s export-reliant economy, Yang said.
The negative output gap widened to 0.63 percent, from 0.55 percent three months earlier, indicating that there is greater room for the domestic economy to improve, Yang said.
The central bank’s decision to keep the rediscount rate unchanged was in line with that of its Japanese and US peers, but Yang said that Taiwan is not taking cues from the US Federal Reserve.
Global funds move rapidly to seek higher yields, increasing currency and capital market volatility around the world, he said.
“I believe the recent appreciation in the local currency has much to do with expectations that the Fed will cut rates,” the governor said.
The New Taiwan dollar gained 1.13 percent this week against the greenback.
The central bank also trimmed its inflation forecast for this year from 0.91 percent to 0.87 percent, due to concern that the global economic slowdown is reducing demand for oil products and raw materials.
Capital repatriation is feeding expectations that the price of industrial land would increase, Yang said, adding that the central bank would pay close attention and rein in a potential property fever.
“We care more about residential housing, which is currently driven by real demand,” he said.
Yang also said that Facebook’s stablecoin, the Libra, would have a bigger influence on global payments than existing cryptocurrencies, because of the US social media giant’s vast membership.
“I don’t think it will develop into a real currency... The attitude of global central banks will decide the coin’s fate,” Yang said, adding that most are open-minded, but share the need for regulation.
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