Taiwanese Monetary Policy Eased Further in the face of Weak Chinese Demand and Brexit Concern

June 30, 2016

Policymakers at the Central Bank of the Republic of China unanimously cut Taiwan’s discount rate to 1.375% from 1.50%.  Reductions of 12.5 basis points had also been agreed upon at the three prior quarterly policy reviews.  A statement released today introduces a fresh concern:

In last week’s referendum, the United Kingdom voted to leave the European Union, leading to heightened volatility across global financial markets. Uncertainty over the future developments after the UK referendum will likely affect monetary policies of major economies, international raw material prices, and, in turn, outlook for the global economy.

The statement notes that growth has weakened in many emerging markets, including Taiwan, which is heavily sensitive to shifts in Chinese demand.  Taiwanese inflation averaged 1.67% over the first five months of 2016, and its output gap remains negative.  Uncertainty created in the wake of the Brexit vote made today’s decision an easy one.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.