Last month’s central bank minutes held a surprise for readers: Two members offered dissenting opinions during the “unanimous” decision to increase interest rates by 12.5 basis points in June.
The central bank, known for having authoritative leaders in the past, released the minutes of its June 16 policy meeting on Thursday.
An initial statement said that the decision to raise its benchmark interest rate by 12.5 basis points was unanimous.
Photo: CNA
However, details of the policy board’s meeting reveal a very different story.
The main point of contention during the meeting was whether to raise rates by 12.5 basis points or the 25 basis points most economists expected. Two members of the board vociferously opposed their peers’ arguments for the smaller increase in a rare example of dissent on the policymaking board, which typically signs off on rate decisions in union.
One member argued the planned hike would be insufficient, saying the central bank should stand its ground to prevent a worsening of inflation expectations and an increased risk of recession.
The member further expressed dissatisfaction that the central bank had not taken additional action on mortgage terms over the past two quarters as housing prices were skyrocketing.
Another raised a concern that the 12.5 basis point rate hike would cause a bigger spread compared with US rates, resulting in greater downward pressure on the New Taiwan dollar and worsening imported inflation.
In the end, the majority in favor of the smaller hike won the argument.
The bank justified the move by saying that a more aggressive increase would hurt economically vulnerable businesses and workers, but would do little to alleviate the supply-side factors driving Taiwan’s rising inflation, such as the higher costs of fuel and food.
Despite their objections, the two dissenters ended up voting in line with their colleagues, avoiding the appearance of a contentious decision.
The fact that their objections were prominently featured in the minutes is notable in itself.
The central bank has been criticized for attempting to downplay internal dissent and maintain the image of unanimity since it began releasing minutes from its policy meetings five years ago in an effort to improve transparency.
A group of current and former policy board members last year released a statement expressing frustration that their objections to the central bank’s currency policy were not reflected in the minutes of board meetings.
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