The central bank on Thursday announced that it would raise its benchmark discount rate by a larger-than-expected 25 basis points to 1.375 percent, effective on Friday, joining many of its global peers in normalizing its monetary policy. It is the bank’s first rate hike in 10 years, and the first increase in the face of fallout from the COVID-19 pandemic and inflationary pressure.
The move came earlier than expected, just hours after the US Federal Reserve announced a rate hike of 25 basis points. Most economists had forecast a sequence of rate hikes by the bank to start in the second quarter of the year.
The central bank had considered economic and financial factors at home and abroad, including a surge in global energy and commodity prices, pressure from imported inflation on the consumer price index (CPI), a gradual recovery in the COVID-hit services sector, improvement in labor market conditions and rate normalization in other economies, such as the US, the bank said in a statement after its quarterly board meeting on Thursday.
After the latest hike, the bank’s policy rates — the discount rate, the rate on refinancing of secured loans and the rate on temporary accommodations — returned to the level of March 2020, before COVID-19 erupted.
Subsequent rate changes — whether they involve bigger or faster increases — will depend on how monetary policymakers view the trajectory of consumer prices over the next few months, as manufacturers pass on higher energy and commodity costs.
However, the central bank’s statement emphasized that elevated inflation would be a persistent trend, with headline CPI expected to stay above the 2 percent threshold through the third quarter.
The bank has formally begun tightening its monetary policy. It is keeping the door open to more hikes this year, saying that it plans to make timely and appropriate adjustments to its monetary policy based on the upside risk of global inflation, the monetary policy of major economies and geopolitical risks.
People have started to question how all the uncertainties facing the world will affect the nation’s economic growth, and how the bank’s tightening will impact real-estate lending and the housing market.
Although the bank’s board meeting did address concerns over the invasion of Ukraine and the sanctions against Russia, the bank seems most concerned about managing imported inflation stemming from geopolitical factors. The bank has maintained a resilient outlook for Taiwan’s economic growth this year, saying that it expects the Russia-Ukraine conflict to have more of a negative effect on inflation in Taiwan than on economic growth.
The central bank said that other concerns for the economy include outbreaks of new variants of SARS-CoV-2 and the effects of climate change, as they could result in higher global inflation, negatively affect economic activity and trigger more volatility in global financial markets — all requiring timely and effective responses from the policymakers.
With economic momentum and inflation the top priorities of the central bank, the sooner it raises rates, the sooner it could cap inflation, while taking the opportunity to moderately curb housing prices.
Raising rates by 25 basis points does not significantly affect real-estate lending or drastically increase the financial burden of mortgage holders, but it shows that the central bank has other tools in addition to the selective credit controls introduced in December 2000. It underscores that the central bank has bolder actions in its policy pipeline if the housing market turns sour.
Because much of what former US president Donald Trump says is unhinged and histrionic, it is tempting to dismiss all of it as bunk. Yet the potential future president has a populist knack for sounding alarums that resonate with the zeitgeist — for example, with growing anxiety about World War III and nuclear Armageddon. “We’re a failing nation,” Trump ranted during his US presidential debate against US Vice President Kamala Harris in one particularly meandering answer (the one that also recycled urban myths about immigrants eating cats). “And what, what’s going on here, you’re going to end up in World War
Earlier this month in Newsweek, President William Lai (賴清德) challenged the People’s Republic of China (PRC) to retake the territories lost to Russia in the 19th century rather than invade Taiwan. He stated: “If it is for the sake of territorial integrity, why doesn’t [the PRC] take back the lands occupied by Russia that were signed over in the treaty of Aigun?” This was a brilliant political move to finally state openly what many Chinese in both China and Taiwan have long been thinking about the lost territories in the Russian far east: The Russian far east should be “theirs.” Granted, Lai issued
On Tuesday, President William Lai (賴清德) met with a delegation from the Hoover Institution, a think tank based at Stanford University in California, to discuss strengthening US-Taiwan relations and enhancing peace and stability in the region. The delegation was led by James Ellis Jr, co-chair of the institution’s Taiwan in the Indo-Pacific Region project and former commander of the US Strategic Command. It also included former Australian minister for foreign affairs Marise Payne, influential US academics and other former policymakers. Think tank diplomacy is an important component of Taiwan’s efforts to maintain high-level dialogue with other nations with which it does
On Sept. 2, Elbridge Colby, former deputy assistant secretary of defense for strategy and force development, wrote an article for the Wall Street Journal called “The US and Taiwan Must Change Course” that defends his position that the US and Taiwan are not doing enough to deter the People’s Republic of China (PRC) from taking Taiwan. Colby is correct, of course: the US and Taiwan need to do a lot more or the PRC will invade Taiwan like Russia did against Ukraine. The US and Taiwan have failed to prepare properly to deter war. The blame must fall on politicians and policymakers
RSS