After a policy meeting on Wednesday last week, the US Federal Reserve said that it would forgo raising interest rates this year, after four rate increases last year, and would reduce its balance sheet to a normal size by September. The Fed trimmed its median US growth forecast for this year to 2.1 percent, compared with an estimate of 2.3 percent in December last year, and revised its inflation growth forecast downward to 1.8 percent from 1.9 percent.
The US central bank has adopted a monetary policy that is more dovish than expected, a dramatic change of heart over the past three months. The change signals that the US economy might be slowing faster than projected, and that the bank is willing to take a more relaxed attitude toward inflation over the short term.
Concerns about a global economic slowdown, Brexit and US-China trade tensions have prompted the Fed to halt for the time being a plan to normalize its monetary policy. The Fed might be setting up conditions that would allow it to act in the event of a sudden turnaround in economic growth and market sentiment. Having raised interest rates nine times since December 2015 does give the bank more leeway to cut rates.
However, other central banks will have greater difficulty rolling out monetary easing to fight an economic slowdown or a recession, as many of them, such as Taiwan’s central bank, have not yet started hiking interest rates.
In an unsurprising announcement on Thursday last week, the central bank said that it had decided to keep policy rates unchanged for the 11th consecutive quarter as the national growth outlook deteriorates amid weak external demand.
The bank cut its GDP growth forecast for this year to 2.13 percent, from a forecast of 2.33 percent in December last year, and revised its inflation growth forecast downward to 0.91 percent from 1.05 percent.
In the near term, monetary tightening appears unlikely given the current economic conditions, and, barring a technical recession — which economists define as two consecutive periods of negative economic growth as measured by GDP — the bank seems unlikely to lower interest rates.
Academics like to debate whether central banks should return real interest rates to normal levels when growth is slowing or normalize interest rates amid the growth worries that have resurfaced since the 2008-2009 global financial crisis.
Actions taken in Taiwan, the US and several other economies suggest that most monetary authorities have chosen the second route. Their dovish stance seems more appropriate in the short term — why should central banks raise interest rates now, only to have to lower them immediately afterward in response to sluggish growth?
However, as economic data point to the global economy continuing to lose steam, policymakers need powerful ammunition other than interest rates to help ease the pain of a sudden downturn. Taiwan has an even greater need for alternatives as it persistently experiences not just low economic growth, but also long-term challenges such as an aging population, weak productivity, excessive savings, low domestic investment and slow wage growth.
At a time when economic growth is stalling, Taiwan needs to implement an expansionary fiscal policy to boost business investment and revive consumer sentiment, because the central bank faces definite obstacles to steering the economy by changing its policy rates.
Saudi Arabian largesse is flooding Egypt’s cultural scene, but the reception is mixed. Some welcome new “cooperation” between two regional powerhouses, while others fear a hostile takeover by Riyadh. In Cairo, historically the cultural capital of the Arab world, Egyptian Minister of Culture Nevine al-Kilany recently hosted Saudi Arabian General Entertainment Authority chairman Turki al-Sheikh. The deep-pocketed al-Sheikh has emerged as a Medici-like patron for Egypt’s cultural elite, courted by Cairo’s top talent to produce a slew of forthcoming films. A new three-way agreement between al-Sheikh, Kilany and United Media Services — a multi-media conglomerate linked to state intelligence that owns much of
The US and other countries should take concrete steps to confront the threats from Beijing to avoid war, US Representative Mario Diaz-Balart said in an interview with Voice of America on March 13. The US should use “every diplomatic economic tool at our disposal to treat China as what it is... to avoid war,” Diaz-Balart said. Giving an example of what the US could do, he said that it has to be more aggressive in its military sales to Taiwan. Actions by cross-party US lawmakers in the past few years such as meeting with Taiwanese officials in Washington and Taipei, and
Denmark’s “one China” policy more and more resembles Beijing’s “one China” principle. At least, this is how things appear. In recent interactions with the Danish state, such as applying for residency permits, a Taiwanese’s nationality would be listed as “China.” That designation occurs for a Taiwanese student coming to Denmark or a Danish citizen arriving in Denmark with, for example, their Taiwanese partner. Details of this were published on Sunday in an article in the Danish daily Berlingske written by Alexander Sjoberg and Tobias Reinwald. The pretext for this new practice is that Denmark does not recognize Taiwan as a state under
The Republic of China (ROC) on Taiwan has no official diplomatic allies in the EU. With the exception of the Vatican, it has no official allies in Europe at all. This does not prevent the ROC — Taiwan — from having close relations with EU member states and other European countries. The exact nature of the relationship does bear revisiting, if only to clarify what is a very complicated and sensitive idea, the details of which leave considerable room for misunderstanding, misrepresentation and disagreement. Only this week, President Tsai Ing-wen (蔡英文) received members of the European Parliament’s Delegation for Relations