Central bank policymakers are planning to save space for further interest rate cuts should there be a sharper economic downturn because of the COVID-19 pandemic, the minutes of their meeting last month that were released yesterday showed.
The policymakers did not think they needed to follow foreign counterparts and lower interest rates, citing a possible gradual recovery in Taiwan’s economy in the second half of the year, the minutes showed.
The central bank unexpectedly left its policy rate unchanged last month, but reduced its growth forecast for this year, as the pandemic threatens to deal a further blow to the trade-reliant economy.
Several board members said the bank should “save space” for possible policy rate adjustments because of economic uncertainty from the pandemic.
“It’s highly uncertain whether there would be a second wave of virus outbreak globally, so it’s better to save some room for the [rate] policy,” one board member said.
Another board member said the bank should consider adjusting its rate policy only if a stronger New Taiwan dollar affects the nation’s export competitiveness.
However, one member said that saving room for further rate cuts should not be a factor in the decision to hold the policy rate, and that the bank should consider using other policy tools if there is a sharper economic downturn.
Taiwan, a key part of the global technology supply chain, has avoided the lockdowns seen in other parts of the world and its economy has performed better compared with many countries in Asia, as early measures prevented a rapid spread of COVID-19.
Some analysts have turned more bullish on Taiwan’s growth outlook, citing stronger-than-
expected technology exports and effective virus-containment measures, which they said would boost domestic demand.
Economic growth is likely to slow to a five-year low this year of 1.67 percent, the government said in May, from 2.71 percent last year.
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