Taiwanese Monetary Policy Steady
December 29, 2011
Officials at the Central Bank of the Republic of China retained a 1.875% ten-day discount rate after the latest quarterly policy review. Note was made of the constraining effects of Europe’s sovereign debt woes on the global and Taiwanese economies: “The slowing global economy has gradually shown its impact on Taiwan. Weaker demand from Taiwan’s major trading partners has weighed on export growth and dragged growth in private investment into negative territory. Growth in private consumption also slowed down.” By the same token, the authorities are on higher alert against future price containment, asserting for example that “inflation has become less easy to tame through an NT dollar appreciation.” CPI inflation over the first eleven months of 2011 averaged 1.4%, while GDP is projected to expand 4.2% next year.
Monetary policy was also left unchanged at the prior review three months ago. Before that, however, rate hikes of 12.5 basis points each were implemented at end-2Q10, end-3Q10, end-4Q10, end-1Q11, and the middle of this year. The cumulative increase of 62.5 basis points, compares with a combined reduction of 237.5 basis points from September 2008 to February 2009 to combat the global Great Recession.
A statement from Taiwanese monetary policymakers defines a role for occasional foreign exchange market intervention within the context of mostly market-determined trading. The statement also maintains that liquidity remains ample in Taiwan’s banking system.
Copyright 2011, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Taiwan monetary policy