The central bank is likely to keep its policy rate unchanged at 1.875 percent at its quarterly board meeting on Thursday after the US Federal Reserve decided last week to maintain its scale of quantitative easing, HSBC said in a report yesterday.
“We have pushed back our call for the rate normalization process in Taiwan to begin from the second quarter next year, rather than from the first quarter,” following the Fed’s unexpected announcement on Wednesday last week that it would not taper its monthly asset purchasing program, HSBC economist Ronald Man said.
The central bank would likely stand pat on its accommodative policy stance now that global peers will take cues from the Fed and extend the “status quo” for a while, Man said.
A longer period of accommodative monetary conditions in Taiwan would be a complementary policy response to the downgrade in the economic growth forecast by the Directorate-General of Budget, Accounting and Statistics to 2.31 percent for this year, from the previous estimate of 2.4 percent, he said.
A more cautious outlook for the second half of the year accounted for the revision, with weaker investment and trade readings cited as the main drag.
Additional rate cuts are unlikely as liquidity conditions in Taiwan are already loose, HBSC said.
Liquidity is sufficiently ample that the monthly amount absorbed by the central bank through money market operations has grown, reaching NT$5.8 trillion (US$195.75 billion) in July, the highest level since April last year, HSBC said.
The figures suggest there is an excess amount of money in the financial system, which may indicate the limited benefits of rate cuts to support growth in the absence of a major negative shock, Man said.
The British bank believes that the bias of future monetary policy in Taiwan is toward tightening.
High household leverage remains a concern for the central bank after household debt stood at about 86 percent of GDP last year, the highest reading across “emerging” Asia, while loose monetary conditions are blamed as a key driver, Man said.
Housing loans, which make up almost 80 percent of household debt, remain exceptionally cheap with the current interest rate being less than 10 basis points above the policy rate, he said. Consequently, residential property prices grew by 15.4 percent in the second quarter, Man said.
Huawei Technologies Co (華為) largely omitted mention of its controversial Mate 60 smartphone series at a grand showcase of its new consumer products yesterday. The Shenzhen-based company would increase smartphone production in response to demand, said consumer division chief Richard Yu (余承東), without naming the handset triggering that surge. The Mate 60 Pro earned international notoriety with its advanced made-in-China processor last month, causing concern in Washington about Huawei’s progress toward developing in-house chipmaking capabilities despite US trade curbs. Huawei’s new phones have fired up the company’s sales and were among the top sellers in China in the week before Apple Inc’s
SLUMP: The electronics, machinery and traditional industries posted the largest decline in the past year; overall, sectors showed gains over the previous month Taiwan’s industrial production index decreased 10.53 percent year-on-year to 91.38 last month, falling for a 15th consecutive month on an annual basis, as weak global economic growth continued to weigh on end-market demand and investment momentum, the Ministry of Economic Affairs said on Saturday. The industrial production index gauges output in Taiwan’s four main industries: manufacturing, electricity and gas supply, water supply, and mining and quarrying. Last month’s decline was the smallest contraction since March when the index dropped 16.03 percent from a year earlier. On a monthly basis, the index rose 7.28 percent, marking a second straight month of improvement,
US-based tech giant Google said yesterday that its efforts to build four underseas cables to connect Taiwan with the world had created more than 64,000 jobs and generated about US$26 billion in GDP for Taiwan as of 2021. The US company has transformed Taiwan into a strategic cloud infrastructure hub in the world. The four undersea cables are part of the company’s investments in cloud infrastructure in Taiwan, and on the back of the undersea cables, a data center and a Google Cloud Region, which is a geographic area in which Google provides infrastructure and services for deploying applications, Google said in
SHOPPING SPREE: The wholesale sector has lagged behind as consumer goods spending has risen, with food and beverage spending hitting almost NT$90 billion Sales in the retail, and food and beverage sectors last month continued to rise, increasing 4.3 percent and 14.3 percent respectively from a year earlier, while sales in the wholesale sector fell for a 10th straight month and declined 5 percent annually, the Ministry of Economic Affairs said on Saturday. The ministry forecast that retail, and food and beverage sales would retain growth momentum this month due to the opening of new shopping malls and the Mid-Autumn Festival. However, the wholesale sector is predicted to see sales drop for another month on an annual basis, as end-market demand remains weak and inventory