The central bank yesterday kept its policy interest rate unchanged at a record low of 1.125 percent, saying that the negative impact of the COVID-19 pandemic has stabilized and consumer activity would get a boost in the second half of the year.
“Board members concluded that it is better to stay put at this time, as relief and stimulus measures have achieved their intended effect of preventing a credit crunch and an economic downturn,” central bank Governor Yang Chin-long (楊金龍) said after its quarterly board meeting, citing an increase in lending and stable interest margins for the past three months.
In March, the bank cut the rediscount rate by 25 basis points to ease the financial burden on corporate borrowers and households as the virus outbreak kept people home and wreaked havoc on retailers, airlines, hotels, restaurants and travel agencies.
Consumer activity might pick up next month with the release of the Triple Stimulus Vouchers on July 15 and other aid programs, Yang said.
The bank lowered its forecast for the nation’s GDP growth this year from 1.92 percent to 1.52 percent, saying it is admirable to stay positive while most other countries face deep recessions induced by lockdowns of nonessential businesses to curb the virus’ spread.
The central bank would not let its guard down, but would closely monitor how the pandemic pans out and respond as needed, Yang said, adding that confirmed cases soared to nearly 8.5 million as yesterday, while there was a new outbreak in Beijing.
Capital formation and government spending would shore up the nation’s GDP growth by 1.45 percent, while exports could slip into negative territory, he said.
Consumer prices might post zero growth, but they are not in danger of deflating, he said.
The governor said that there had been interventions in foreign exchange markets to slow the appreciation of the New Taiwan dollar.
“The rapid and massive capital influx this month, reversing five months of outflows, warranted interventions to stabilize the local currency market,” Yang said, attributing the inflows to a relatively resilient TAIEX and local firms burnishing their semi-annual accounts.
Capital movements drove the NT dollar up 1.9 percent after months of depreciation, Yang said.
However, there was no evident capital flight from Hong Kong to Taiwan or fund flows from speculation on local properties.
US President Donald Trump had threatened to terminate Hong Kong’s favorable trade status if Beijing pushes security legislation on the territory.
Yang said Trump has not yet made good on the threat and it would be difficult for other destinations to replace Hong Kong as a regional financial hub.
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