Central bank Governor Yang Chin-long (楊金龍) yesterday said that there is no need to adjust interest rates if economic conditions remain the same as three months earlier.
“Guided by economic data at home and abroad, the central bank decided to leave policy rates unchanged in December last year... I do not see reasons for a change if the state of the economy is about the same,” Yang said at a meeting of the Legislative Yuan’s Finance Committee in Taipei.
The central bank is to review policy rates at its quarterly board meeting on March 21, after holding the rediscount rate steady at 1.375 percent for the past 10 quarters.
Research institutes have voiced similar views, saying an economic slowdown and mild inflation would give the central bank room to maintain its lenient monetary policy to help support the economy.
A rate cut is also unlikely as the central bank is anticipating GDP growth of 2.33 percent for this year, slightly higher than the 2.27 percent pickup predicted by the Directorate-General of Budget, Accounting and Statistics (DGBAS).
Taiwan has taken a hit from the US-China trade dispute and an ongoing global technology cyclical correction.
Yang said he is confident that the nation’s export-oriented economy could grow at least 2 percent this year, from 2.63 percent last year, despite global headwinds.
“The slowdown is not serious so long as the trade tension does not escalate beyond control and have a limited impact on the global economy,” Yang said.
The dispute might linger for another three to five years as the US and China have had difficulty ironing out differences over intellectual property protection and corporate subsidies.
The US-China trade deficit could be resolved in a short period of time, but it would take greater efforts to address structural issues, such as intellectual protection and government subsidies for industries, Yang said.
Consumer price growth is unlikely to surpass its 2 percent benchmark, in the absence of major increases in average wages and international crude oil prices, he said.
Crude oil prices would have to surge from US$65 a barrel to US$100 or higher to push the inflationary gauge over the 2 percent mark, he said.
The DGBAS last month forecast that inflation would grow 0.73 percent this year.
Yang added that expectations of a global slowdown have diminished chances of rate hikes — from twice to none — by the US Federal Reserve for this year.
As for Taiwan, the central bank’s decision would be guided by major economic data, Yang said.
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