The public tends to expect the central bank to pursue a monetary policy that is anti-inflationary, counter-cyclical and able to balance the needs of exporters, importers, average income earners and big business.
However, the central bank is not all-powerful, so most people have long supported its independence and ability to defend its credibility in the face of market and political pressure.
The central bank on Thursday released the minutes of its June 22 policy meeting for the first time in its history, a move that follows in the footsteps of most major economies to bring greater transparency and communication.
The action also aims to enhance the bank’s accountability, as Governor Perng Fai-nan (彭淮南) is expected to step down in February next year, its first change of leadership in 20 years.
The minutes show that the interest rate decision was unanimous — all 15 board members believed that monetary tightening should not be pursued at this stage, considering that inflationary pressure might remain benign in the second half of this year, while economic growth is likely to weaken due to limited export growth and slow upturns in private consumption and investment.
All board members voted to maintain the bank’s rediscount rate at 1.375 percent, the minutes said.
The minutes also revealed the bank’s GDP growth forecast of 2.13 percent and its inflation rate forecast of 1.07 percent for this year, which are not far from the Directorate-General of Budget, Accounting and Statistics’ estimates made in May of 2.05 percent and 0.95 percent respectively.
However, apart from an economic overview by board members, the minutes showed some members’ concerns about the effects of foreign capital flows and a high foreign ownership rate of Taiwanese stocks, as well as worries by other participants about the New Taiwan dollar’s appreciation this year and its tightened effect on the local financial system.
Several members also addressed a narrowing yield spread between US Treasury bonds and Taiwan’s government bonds despite the US Federal Reserve’s consecutive rate hikes this year, and said that its effect on capital flows and currency exchange rates is worth watching.
Overall, the bank’s first-ever release of meeting minutes represents its board’s willingness to communicate with the public, conveying one important message: There was no tightening bias among board members. However, from a long-term perspective, releasing the minutes reveals board members’ views on some key issues and their votes on interest-rate adjustments.
Therefore, it will add pressure on participants to better prepare for subsequent meetings and is likely to foster a more healthy debate on monetary policies.
Even so, there is still room to improve the board’s transparency and accountability in its decisionmaking, because the minutes did not disclose the identity of participants in certain discussions.
Perng, who assumed the position in February 1998, is the nation’s longest-serving central bank governor. The decision to release the minutes sets an example for his successor, as Perng has come to realize the importance of transparency and is all too aware of criticism of his authoritarian leadership style.
However, the real challenges for the future governor and the board lie in accepting that markets are messy places and policy missteps can lead to economic disasters, not to mention acting on the basis of their professional skills and based on their beliefs.
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