Taiwan will not use negative interest rates or quantitative easing to mitigate the impact of the COVID-19 pandemic, as there is still room for interest rate cuts if necessary, central bank Governor Yang Chin-long (楊金龍) told lawmakers in Taipei yesterday.
Lawmakers across party lines voiced concern at a meeting of the Finance Committee on the impact of COVID-19 that the central bank’s actions to reduce the potential economic fallout of the pandemic appear modest compared with its peers around the world.
“There is still room for rate cuts if the coronavirus crisis wreaks a heavier havoc, but there will not be zero or negative interest rates,” Yang said.
Photo: CNA
Consumer prices, financial stability and the nation’s economic showing would guide the bank’s decisions, he said.
The central bank on March 19 cut interest rates by 0.25 percentage points to a record low of 1.125 percent, and announced an injection of NT$200 billion (US$6.61 billion) into the system to ease the financial burden on households and companies from the pandemic.
Lawmakers said that other central banks are taking more aggressive measures to stave off a credit crunch, citing the US Federal Reserve’s 125 basis point rate cut, and unlimited purchases of government and corporate debt as one example.
Yang said the situation in Taiwan is different from that of the US and requires different measures in response.
Quantitative easing is helpful in boosting market confidence and averting a liquidity squeeze, as seen during the global financial crisis of 2008, but large Taiwanese corporations have ample liquidity, making debt purchases unwarranted, he said.
However, travel and quarantine restrictions due to the pandemic have hit service industries hard, while electronics firms are in danger of supply chain disruptions, he said.
This is why the central bank is seeking to channel relief money to small and medium-sized enterprises that are under strain, Yang said.
Yang said that he had personally pleaded with local banks to provide loans at preferential interest rates to affected companies.
Not having to face a cash crunch means companies would be less inclined to lay off employees, thereby putting them in financial difficulties, he said.
The central bank would continue to closely monitor the situation and would expand the size of funding, if necessary, he said.
Yang said that he is confident the pandemic would not create a financial crisis in Taiwan even if it persists beyond the first half of the year, but added that he is less confident about other countries’ financial health.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US
Prices of gasoline and diesel products at domestic gas stations are to fall NT$0.2 and NT$0.1 per liter respectively this week, even though international crude oil prices rose last week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. International crude oil prices continued rising last week, as the US Energy Information Administration reported a larger-than-expected drop in US commercial crude oil inventories, CPC said in a statement. Based on the company’s floating oil price formula, the cost of crude oil rose 2.38 percent last week from a week earlier, it said. News that US President Donald Trump plans a “secondary