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.
ENERGY ISSUES: The TSIA urged the government to increase natural gas and helium reserves to reduce the impact of the Middle East war on semiconductor supply stability Chip testing and packaging service provider ASE Technology Holding Co (日月光投控) yesterday said it planned to invest more than NT$100 billion (US$3.15 billion) in building a new advanced chip testing facility in Kaohsiung to keep up with customer demand driven by the artificial intelligence (AI) boom. That would be included in the company’s capital expenditure budget next year, ASE said. There is also room to raise this year’s capital spending budget from a record-high US$7 billion estimated three months ago, it added. ASE would have six factories under construction this year, another record-breaking number, ASE chief operating officer Tien Wu
The EU and US are nearing an agreement to coordinate on producing and securing critical minerals, part of a push to break reliance on Chinese supplies. The potential deal would create incentives, such as minimum prices, that could advantage non-Chinese suppliers, according to a draft of an “action plan” seen by Bloomberg. The EU and US would also cooperate on standards, investments and joint projects, as well as coordinate on any supply disruptions by countries like China. The two sides are additionally seeking other “like-minded partners” to join a multicountry accord to help create these new critical mineral supply chains, which feed into
For weeks now, the global tech industry has been waiting for a major artificial intelligence (AI) launch from DeepSeek (深度求索), seen as a benchmark for China’s progress in the fast-moving field. More than a year has passed since the start-up put Chinese AI on the map in early last year with a low-cost chatbot that performed at a similar level to US rivals. However, despite reports and rumors about its imminent release, DeepSeek’s next-generation “V4” model is nowhere in sight. Speculation is also swirling over the geopolitical implications of which computer chips were chosen to train and power the new
TECH WINNERS: Taiwan and South Korea reported robust trade, which suggests that they have critical advantages in the rapidly expanding AI supply chain, an official said Exports last month surged to a new high, as booming demand tied to artificial intelligence (AI) infrastructure fueled shipments of advanced technology components, underscoring the nation’s pivotal role in the global semiconductor supply chain. Outbound shipments climbed to US$80.18 billion, the highest ever for a single month, rising 61.8 percent from a year earlier and marking the 29th consecutive month of growth, the Ministry of Finance said yesterday. “The surge was driven primarily by global investment in AI infrastructure,” Department of Statistics Director-General Beatrice Tsai (蔡美娜) said. The mass production of next-generation AI computing systems has accelerated procurement across the semiconductor supply
RSS