The central bank kept its benchmark policy rate unchanged at a record low of 1.25 percent for a fifth consecutive time at its quarterly Monetary Policy Committee meeting on March 25.
It also kept interest rates on both secured and unsecured loans steady at 1.625 percent and 3.5 percent, respectively. In their post-meeting press comments, policymakers cited uncertainties about the global recovery, relatively mild domestic inflationary pressures and the high unemployment rate as the reasons for the decision. They reiterated that the current policy is necessary to support the recovery.
The central bank did not hike the reserve requirement ratio as many had expected, despite signaling earlier that it intended to drain excess reserves from the banking system.
However, it did keep open the option of issuing long-dated Negotiable Certificates of Deposit in case it was necessary to drain reserves.
Policymakers do appear concerned that any reversal of the policy stance would have an undesirable impact.
This is a clear indication that the central bank will stay with a pro-growth monetary stance until the recovery becomes broad-based.
There are signs of a slowdown in momentum, however.
For example, the leading indicator index has slowed for six straight months on a six-month-change basis, indicating that the current growth rebound is likely to ease in the second quarter this year.
Recent export data have shown a rebound largely on the back of strong demand from China, while the recovery in exports shipments to the US and Europe has been sluggish.
Given Taiwan’s reliance on external demand, there is concern about the sustainability of the current recovery.
The relatively large labor resource gap — ie, the difference between the current and “natural” rate of unemployment — is likely to be another factor keeping the CBC on hold. Although the country’s unemployment rate fell to a one-year low of 5.65 percent this past February, it is still significantly higher than the 4 to 4.5 percent range before the financial crisis.
Moreover, much of the recent improvement came from tech firms increasing hiring during the Lunar New Year.
Therefore, we expect the unemployment rate to flat-line in the second quarter, especially as tech producers gradually fill their manpower requirements for the year.
Tony Phoo is a Standard Chartered economist based in Taipei.
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
The past few months have seen tremendous strides in India’s journey to develop a vibrant semiconductor and electronics ecosystem. The nation’s established prowess in information technology (IT) has earned it much-needed revenue and prestige across the globe. Now, through the convergence of engineering talent, supportive government policies, an expanding market and technologically adaptive entrepreneurship, India is striving to become part of global electronics and semiconductor supply chains. Indian Prime Minister Narendra Modi’s Vision of “Make in India” and “Design in India” has been the guiding force behind the government’s incentive schemes that span skilling, design, fabrication, assembly, testing and packaging, and
Can US dialogue and cooperation with the communist dictatorship in Beijing help avert a Taiwan Strait crisis? Or is US President Joe Biden playing into Chinese President Xi Jinping’s (習近平) hands? With America preoccupied with the wars in Europe and the Middle East, Biden is seeking better relations with Xi’s regime. The goal is to responsibly manage US-China competition and prevent unintended conflict, thereby hoping to create greater space for the two countries to work together in areas where their interests align. The existing wars have already stretched US military resources thin, and the last thing Biden wants is yet another war.