Central Bank of the Republic of China (Taiwan)
December 22, 2016
It was decided unanimously to leave Taiwan’s central bank interest rate at 1.375% after the latest quarterly policy review. Four consecutive reductions of 12.5 basis points had been implemented in September and December of 2015 and March and June of this year. A statement released after the meeting justified the stance as follows:
Against a backdrop of moderate momentum for the domestic economic recovery next year, a lingering negative output gap, mild inflation, and stable expectations of future inflation, the Board judged that holding policy rates unchanged and maintaining the M2 growth target range at 2.5%-6.5% to keep monetary conditions accommodative will help foster economic growth.
Explicitly identified risks include
- The US Fed policy rate path,
- The Trump administration’s new policy direction,
- Rising trade protectionism,
- The impact of Brexit,
- China’s rebalancing,
- And monetary policy divergence among major central banks has induced erratic cross-border capital movements which could potentially heighten volatility in global financial markets.”
Growth is forecast to be slightly slower than 2% next year but better than this year. Mild inflation and stable expectations of future inflation are also assumed. The statement reiterates the central bank’s right and obligation to at times counter excessive and disorderly movements as of the new Taiwan dollar.
Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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