UPDATE 1-Taiwan c.bank holds key rates, cuts 2019 growth forecast again

23-Mar-2019 Intellasia | Reuters | 6:00 AM Print This Post

Taiwan’s central bank left its policy rate unchanged on Thursday, as widely expected, and again lowered its forecast for 2019 economic growth as a global electronics slowdown hurts the island’s export-reliant economy.

Meeting after the Federal Reserve left US rates unchanged hours earlier, Taiwan’s central bank kept the benchmark discount rate at 1.375 percent, where it has stood since June 2016.

“Like last year, we maintain appropriate loose monetary policy,” Central Bank Governor Yang Chin-long told a news conference following the policy review. He added that the bank’s future rate decisions will be based on factors including the inflation outlook and output gap.

Taiwan’s technology sector has been hit by slowing demand for consumer electronics, China’s cooling economy and a trade war between China and the United States, its two biggest export markets.

The island’s export orders fell the most in nearly three years in February, from a year earlier, likely heralding more pain for the economy.

Responding to the impact of Sino-US trade frictions on Taiwan, he warned about a possible switch of orders, tech or otherwise, from Taiwan to elsewhere and a shake-up of the supply chain. He added the central bank would continue to monitor the situation closely.


The central bank said it would maintain appropriately loose monetary policy to support the economy, as it revised down projected 2019 growth to 2.13 percent from 2.33 percent estimated in December.

Some analysts had reckoned the previous forecast was already too high. ING forecasts growth of 1.8 percent this year, noting there is little the central bank can do to counter external pressures.

The economy grew 2.63 percent in all of 2018, but slowed markedly to 1.78 percent in the fourth quarter.

“The economy is indeed slowing, but contraction is not an issue,” said Standard Chartered Bank economist Tony Phoo. “In the short term, there’s no need for the central bank to adjust rate.”

The central bank also said it now expects 2019 core inflation to be 0.78 percent, down from 0.93 percent forecast in December.

Thanks to its large current account surplus and substantial foreign exchange reserves, Taiwan is better placed to withstand capital outflows as investors shift funds to more high-yielding assets and enjoys more monetary policy flexibility.

All sixteen economists in a Reuters poll had expected the central bank would leave the benchmark discount rate unchanged.



Category: Taiwan

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