Following its emergency rate cut of 25 basis points yesterday, the central bank is likely to turn proactive and implement more rate cuts when it meets in December and next March to help the domestic economy weather the global financial crisis, analysts said yesterday.
There’s still room for the nation’s rates to go down another 0.5 percent “so as to spur private investment and domestic consumption,” Waterland Securities Co (國票證券) chairman Michael Ding (丁予康) said at an economic forum yesterday.
Polaris Research Institute (寶華綜合經濟研究院) president Liang Kuo-yuan (梁國源) said the central bank would further loosen monetary policy in December when the US Federal Reserve is also expected to announce more rate cuts.
“The global economy is moving toward recession, if it is not in one already,” Liang said by telephone. “The picture in Taiwan is a little brighter. While the government has no control over the global trend, it can take steps to bolster domestic demand and investor confidence. The rate cut appeared to serve the [latter] purpose.”
Citigroup economist Cheng Cheng-mount (鄭貞茂) expressed similar views.
“Considering the sharply deteriorating global outlook and joint efforts from global central banks ... we expect further cuts of 25 basis points in December and March,” he said in a research note yesterday.
UBS Investment Research expressed concern over the rising downside risk to the nation’s economic growth of weakening global demand. It projected GDP growth of 3.1 percent for the domestic economy next year.
In a report released yesterday, authored by Sean Yokota, UBS said it expected the nation’s discount rate to drop to 1.5 percent from 3 percent — compared with UBS’ initial estimate of 2.75 percent — over the next 12 months. That would mean a total rate cut of 150 basis points over the next year.
But Standard Chartered Bank (Taiwan) Ltd predicted a smaller decrease, expecting rates to fall to 2 percent by the end of next year.
The bank’s chief economist, Tony Phoo (符明財), said yesterday that the central bank might cut interest rates by 25 basis points each in December and March and cut another 25 basis points next June, than keep rates unchanged next September.
ADDITIONAL REPORTING BY CRYSTAL HSU
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