Several central bank board members warned about inflation risks and called for the issue to be closely monitored, while they supported a hold on rates, the minutes from March’s central bank policy meeting showed.
Several board directors, while agreeing to keep rates unchanged, voiced concern over expectations that inflation would escalate and the exchange rate of the New Taiwan dollar, said the minutes, which were released on Thursday.
There would not be much space for rate hikes, as advanced economies broadly kept an accommodative monetary policy stance, a board director said.
Photo: CNA
Market concerns over inflation in the US could raise uncertainty over the NT dollar, posing challenges to the central bank’s foreign exchange policy, the director said.
Inflation expectations in March weakened the local currency against the US dollar, but ongoing global fund influxes reversed the trend last month.
Another board director said that risks linked to inflation expectations must be heeded and urged the central bank to pay close attention should renewed capital inflows for stock investment by foreign investors cause the NT dollar to strengthen.
A director proposed that the central bank begin to survey inflation expectations and consumer finances, as price stability is its top priority and inflation expectations shape consumer behavior.
The survey on consumer finances should encompass data on household balance sheets, income, real estate, financial assets, use of payment tools, and savings and investment intentions so the bank could gain a better understanding of household financial conditions, the director said.
The proposal won support from several others, but one said that it would be better if the survey were conducted by another government agency or outsourced, given the complexity of the task.
However, another said that some data might be off limits to such entities, because of trade secret protections.
Discussions about rate changes should wait until COVID-19 pandemic relief measures expire on June 30 and after it is determined how the economy’s evolution would be affected.
Central bank Governor Yang Chin-long (楊金龍) earlier indicated that Taiwan would not hike interest rates, as long as global peers stand by their loose policy stance, although he had previously said that the precondition was not necessary.
Consumer price inflation has been above 1.2 percent for months, and companies across sectors plan to raise prices to reflect higher prices for raw materials and fuel, the minutes said.
Taiwan’s GDP last quarter expanded 8.16 percent and might achieve full-year growth of more than 5 percent, the minutes said.
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