Taiwan is not at risk of stagflation as the nation’s economy would grow at least 2 percent this year with inflation expanding by a similar rate, rendering current monetary policies appropriate, central bank Governor Yang Chin-long (楊金龍) said at a meeting of the legislature’s Finance Committee yesterday.
Taiwan’s GDP growth, projected at 2.12 percent this year by the Directorate-General of Budget, Accounting and Statistics (DGBAS), would receive a further boost from the government’s plan to distribute NT$6,000 to all citizens later this year, Yang said.
The stimulus program would lift this year’s economic growth to about 2.5 percent, he added.
Photo: Wang Yi-sung, Taipei Times
Yang’s statements came after lawmakers cited central bank Deputy Governor Chen Nan-kuang (陳南光) as questioning whether the bank should act more aggressively in fighting inflation.
In an article in last month’s edition of Taiwan Banker magazine, Chen said the central bank should have adopted a more aggressive monetary policy to fight inflation as the country could slip into stagflation.
Stagflation refers to a period of rapid price increases, accompanied by low or negative growth and high unemployment.
Yang dismissed the concern, saying that Taiwan’s GDP would expand by more than 2 percent this year unless global economic conditions deteriorate faster than expected.
The first half of this year would be fairly weak as inventory corrections are likely to continue hounding exporters, Yang said.
However, the situation should improve in the second half of the year on the back of inventory restocking and the holiday season, he said.
Taiwan’s low unemployment rate should further lend support to the governor’s cautiously optimistic view.
The central bank is looking at inflation of 2 percent and would update its forecast at the next board meeting on March 23, Yang said.
Most board members rallied behind the decision in December to hike policy rates by 12.5 basis points, a move Yang called “appropriate” given Taiwan’s moderate inflation.
Since March last year, the central bank has raised rates by 62.5 basis points, while the US Federal Reserve has increased rates by 450 basis points.
Growth in Taiwan’s consumer price index (CPI) climbed above the 3 percent mark in January, but this was mainly due to the Lunar New Year holiday effect, and likely eased last month and possibly beyond, the governor said.
Inflationary pressures remain, and the central bank would review policy rates after considering geopolitical tensions, commodity price trends, climate change, and economic movements at home and abroad, he said.
International research bodies expect Taiwan’s CPI to expand between 1.4 percent and 2.6 percent this year, compared with the DGBAS’ projection of 2.16 percent, Yang said.
The wide range highlights the uncertainty that makes forecasting difficult, he said.
The governor said he welcomed a bill sponsored by US lawmakers advocating IMF membership for Taiwan, which he said would bring plenty of benefits and no negative effects.
IMF officials assisted the central bank in drawing up its duties and responsibilities, and guided it in how it should operate to maintain the financial market’s stability, Yang said.
However, Yang said he understood that UN membership is a precondition for pursuing IMF membership.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS