Although inflation has moderated and the economy remains stable, the central bank views uncertainty from potential US tariffs as a downside risk to economic growth in the second half of the year, which warrants continued vigilance and a hold on interest rates, board meeting minutes released yesterday showed.
Board members said that the appreciation of the New Taiwan dollar against the US dollar has helped curb import prices, potentially easing inflationary pressures.
However, they cautioned that the lower inflation in May was partly due to a high base from the previous year, underscoring the need to closely monitor price trends.
Photo: Ann Wang, Reuters
Concern was raised over persistent year-on-year increases in housing rent and prices of frequently purchased goods, the minutes showed.
Some directors also warned that further NT dollar appreciation might weigh on Taiwan’s economic momentum.
One board member was less pessimistic, saying that Taiwan’s deeper integration into global value chains has reduced the export sector’s sensitivity to exchange rate fluctuations.
A weaker currency used to boost exports, but that effect has diminished due to structural changes in trade, the director said.
Another board member warned that higher US tariffs could pose risks to inflation and broader economic activity.
While some of the impact might prove transitory, sustained supply chain disruptions could result in more lasting effects, they said.
Washington has set a 15 percent tariff on Japan and South Korea, Taiwan’s major trade competitors. Against this backdrop, board members said that the economic outlook for the second half of the year remains uncertain.
On the credit front, several directors said there was a cooling in the housing market, following the central bank’s selective controls introduced in September last year.
As the ratio of real-estate lending to total bank lending has declined, but remains relatively high, most board members supported maintaining controls while continuing to track real-estate loan concentration and assessing the effectiveness of policy tools, the minutes showed.
Some banks have been more cautious in meeting their disciplinary lending targets, reflecting varied levels of prudence in credit allocation, the minutes said.
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