Taiwan does not need to follow the US Federal Reserve’s latest interest rate hikes next month, and should allow the nation’s own inflation and GDP data to guide policy decisions, central bank Governor Yang Chin-long (楊金龍) said yesterday.
Yang made the comment while answering questions from lawmakers one day after the Fed raised its interest rate by 0.75 percentage points, the latest hike intended to fight inflation.
“Taiwan’s economic situation is different from that in the US, and does not need to follow every move the US makes,” Yang told a meeting of the legislature’s Finance Committee.
Photo: Fang Pin-chao, Taipei Times
The Fed on Wednesday made its fourth rate hike this year, which lifted the rate to 4 percent.
Taiwan’s consumer price index (CPI) eased below the 3 percent mark in August and last month, but stayed above the central bank’s tolerance level of 2 percent.
Any rate-hike lag between Taiwan and US, estimated to be three months at most, would be handled by policy rate decisions appropriate to the local economy.
The CPI is expected to surpass 3 percent this year, but would retreat to within the tolerance range next year, Yang said.
GDP growth would range from 2.5 to 3 percent next year, down from a range of 3 to 3.5 percent this year.
A neutral stand on rate hikes for the rest of the year is likely, given heightening economic risks along with stabilization of energy and raw material prices, Yang said, adding that he first needs to see more inflation data.
Yang dismissed concerns about a possible “lost decade,” or sustained stagflation, as happened in Japan after a property bubble collapse in 1991, and in many Western nations after the 2008 financial crisis.
Taiwan’s economy has remained on a stable course of expansion, although the pace is slowing, he said.
Yang has favored a mild approach toward interest rate hikes, given concerns that drastic moves could burden families and strain first-home owners.
He has alternatively sought to tackle inflation through tightening the banks’ required reserve ratio.
Several board directors challenged Yang’s policy stance and pushed for a bolder move, September board meeting minutes showed yesterday.
One director said that Taiwan’s CPI would become noticeably higher without government interventions such as reducing tariffs on imported oil and raw materials, and an extension of electricity rate-hike suspensions.
That director also said inflation would not decline below 2 percent next year, and recommended a rate hike of 0.25 percentage points.
Another director said the central bank can better achieve price stability with a 0.25 percentage point adjustment, as housing prices have risen to record highs in many areas.
“A policy rate hike — whatever the size — sends a clear message of tightening to the public, whereas a reserve requirement ratio increase would seem less straightforward, and its effect would take some time to show,” the director said.
Another director said that longstanding low interest rates in Taiwan have weighed on the economy and the financial sector. A 0.125 percentage point hike would not effectively ease inflation or inflation expectations.
A mild approach would widen Taiwan’s interest rate gap with the US, putting depreciation pressure on the local currency and driving up imported inflation, the director said.
The central bank is scheduled to review its policy stance during its next quarterly board meeting on Dec. 20, Yang said.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
ARTIFICIAL INTELLIGENCE: The chipmaker last month raised its capital spending by 28 percent for this year to NT$32 billion from a previous estimate of NT$25 billion Contract chipmaker Powerchip Semiconductor Manufacturing Corp (力積電子) yesterday launched a new 12-inch fab, tapping into advanced chip-on-wafer-on-substrate (CoWoS) packaging technology to support rising demand for artificial intelligence (AI) devices. Powerchip is to offer interposers, one of three parts in CoWoS packaging technology, with shipments scheduled for the second half of this year, Powerchip chairman Frank Huang (黃崇仁) told reporters on the sidelines of a fab inauguration ceremony in the Tongluo Science Park (銅鑼科學園區) in Miaoli County yesterday. “We are working with customers to supply CoWoS-related business, utilizing part of this new fab’s capacity,” Huang said, adding that Powerchip intended to bridge
Microsoft Corp yesterday said that it would create Thailand’s first data center region to boost cloud and artificial intelligence (AI) infrastructure, promising AI training to more than 100,000 people to develop tech. Bangkok is a key economic player in Southeast Asia, but it has lagged behind Indonesia and Singapore when it comes to the tech industry. Thailand has an “incredible opportunity to build a digital-first, AI-powered future,” Microsoft chairman and chief executive officer Satya Nadella said at an event in Bangkok. Data center regions are physical locations that store computing infrastructure, allowing secure and reliable access to cloud platforms. The global embrace of AI
Qualcomm Inc, the world’s biggest seller of smartphone processors, gave an upbeat forecast for sales and profit in the current period, suggesting demand for handsets is increasing after a two-year slump. Revenue in the three months ended in June will be US$8.8 billion to US$9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be US$2.15 to US$2.35 a share. Analysts had projected sales of US$9.08 billion and earnings of US$2.16 a share. The outlook signals that the smartphone market has begun to bounce back, tracking with Qualcomm’s forecast that demand would gradually recover this year. The San