The central bank is expected to leave key interest rates unchanged at its upcoming quarterly policymaking meeting scheduled for March 20, amid economic uncertainties due to US President Donald Trump’s tariff threats, economists said on Sunday.
Wu Meng-tao (吳孟道), director of the sixth research division at the Taiwan Institute of Economic Research (台灣經濟研究院), said Trump’s tariff threats are likely to dominate the central bank’s quarterly meeting as they could send ripples through global financial markets, and what the central bank has to do is address likely uncertainties.
After Trump took office on Jan. 20, he signed executive orders to impose tariffs on imports from China, Canada and Mexico, while threatening to introduce “reciprocal tariffs” without exceptions.
Photo: Chen Mei-ying, Taipei Times
Trump has also repeatedly claimed Taiwan “stole” the semiconductor business from the US, raising speculation of potential tariffs on Taiwanese chips.
Therefore, the central bank is expected to maintain its monetary policy to allow it more flexibility to take on possible volatility in financial markets, Wu said.
“Judging from the information I have, Trump is likely to impose reciprocal tariffs in April at the earliest and Taiwan is unlikely to escape them,” he said. “When Trump comes up with concrete tariff hikes, a global tariff war could follow. Before that, the central bank should stay steady and prepare itself for the impact.”
However, there is concern that Taiwan Power Co (台電) could raise electricity rates next month, which would push up inflation, as the state-run utility is under pressure due to massive accumulated losses and a cut in its budget by the legislature, he said.
While a potential electricity rate hike would push up inflation, a tariff war could hurt global trade, send commodity prices lower and undermine the world economy, which could offset the effect of rising inflationary pressure caused by higher power rates, National Central University Research Center for Taiwan Economic Development director Dachrahn Wu (吳大任) said.
In the wake of Trump’s tariff hikes, the central bank could consider how to boost the economy rather than how to slow down inflation, he said.
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