The central bank yesterday held its policy rates steady for the fourth consecutive quarter, as economic uncertainty escalates and inflation slows, but stays elevated.
Inflation remains the bank’s top priority although US President Donald Trump’s trade policies cast a shadow over the global economic landscape, central bank Governor Yang Chin-long (楊金龍) said at a news conference after the bank’s quarterly board meeting.
“There is no room for monetary easing amid a stable economy, despite a lingering negative output gap,” Yang said.
Photo: CNA
The consumer price index (CPI) is projected to grow a benign 1.89 percent this year, while core CPI would advance 1.79 percent, he said.
The inflation reading could accelerate to 2.04 percent if state-run electricity, water and railway service providers all raise charges, Yang said.
Taiwan Power Co (台電), Taiwan Water Corp (台水) and Taiwan Railway Corp (台鐵) have all announced plans to increase fees to maintain healthy operations.
Yang said policymakers refrained from a pre-emptive rate hike because inflation readings have demonstrated a subdued trajectory, while local shares and real estate have endured price corrections due to a negative environment triggered by Trump’s tariff threats.
The central bank cut its forecast for the nation’s GDP growth this year from 3.13 percent to 3.05 percent, as Trump’s deglobalization moves would have a negative, though limited impact on Taiwan.
Yang said that he is worried about an upcoming currency report by the US Department of the Treasury that has placed Taiwan on its currency watch list in the past few years.
Taiwan’s trade surplus with the US has sharply widened due to aggressive demand from US technology giants for Taiwanese chips and servers used to develop artificial intelligence capabilities, he said.
Yang said that he is not sure about the so-called reciprocal tariff policy the Trump administration has pledged to introduce on April 2, adding that Taiwan’s tariffs are quite friendly in this regard, except for agricultural products.
US Secretary of the Treasury Scott Bessent in an interview with Fox News on Tuesday said that there are nations called the “dirty 15” that impose substantial tariffs on the US, judging by last year’s import and export data. Many have speculated that Taiwan could be included on the list and is facing the risk of reciprocal tariffs by the US.
Yang said Taiwan and the US have forged a mutually beneficial partnership whereupon US technology brands have made a fortune by relying on electronic components manufactured by Taiwanese suppliers.
Taiwan has the seventh-largest trade surplus with the US, at US$7.39 billion last year, after China, the EU, Mexico, Vietnam, Ireland and Germany, US customs data showed.
Japan, South Korea, Canada, India, Thailand, Italy, Switzerland and Malaysia also recorded sizeable trade surpluses with the US.
Asked about the impact of economic uncertainty on the New Taiwan dollar, Yang said the foreign exchange market would have the final say on the local currency’s value and its recent depreciation has much to do with foreign portfolio managers taking profits by selling local shares, mainly Taiwan Semiconductor Manufacturing Co (TSMC, 台積電).
TSMC’s plan to build three more plants in the US would not weigh on the New Taiwan dollar since the chipmaker would carry out the investment plan over a number of years and it could do so by issuing debt on the US market, he said.
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