Taiwan’s tight monetary cycle is not yet over and consumer price movements would dominate the central bank’s policy decisions, central bank Governor Yang Chin-long (楊金龍) said yesterday.
Yang made the remarks while taking questions from lawmakers at a meeting of the legislature’s Finance Committee, which is reviewing the central bank’s proposed budget for next year.
“The central bank did not rule out the possibility of raising interest rates in the future after leaving interest rates unchanged for the second time in September,” Yang said.
Photo: Peter Lo, Taipei Times
The flexibility in policy stance is appropriate, as inflationary pressures linger and consumer prices have not yet returned to the 2 percent target, he said.
The consumer price index (CPI) last month accelerated above the 3 percent mark as successive typhoons disrupted fruit and vegetable supply and drove up their prices, the Directorate-General of Budget, Accounting and Statistics reported on Tuesday, calling the uptick seasonal and transient.
Yang refused to define his stance as either “dovish” or “hawkish.” Rather, the governor said he is approaching the matter in a “data-dependent” fashion like the US Federal Reserve.
The Fed on Wednesday last week decided to hold its benchmark lending rate at its current 22-year high for the second consecutive policymaking meeting.
Taiwan’s central bank detailed its reasoning and considerations in the minutes of the September board meeting, Yang said.
In the document released last week, all board directors supported a policy pause to avoid straining the economy, but some raised the need to revive rate hikes if rents, housing prices and public expectations warrant tightening.
Taiwan’s export-reliant economy would come out of the woods and resume steady growth from this quarter, giving the central bank room to focus on its mandate to stabilize consumer prices, several directors said.
The US, the EU and the UK all share the need to turn the CPI back to the 2 percent target so that inflation would not wipe out the benefits of economic growth for average people, Yang said.
The policy goal might not be achievable until 2025, as major central banks seek to dodge a hard landing and services inflation tends to be sticky, the governor said.
Taiwan’s inflation is relatively moderate at an estimated below 2.5 percent this year and would lose further steam next year, Yang said.
The central bank is looking to generate NT$200 billion (US$6.2 billion) to the state coffers next year, in line with cautious management of the nation’s foreign exchange reserves, the governor said.
The approach enabled the monetary policymaker to stay profitable last year, despite a bearish market worldwide, he said.
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