The Central Bank of the Republic of China (Taiwan) has scheduled a quarterly policymaking meeting for Sept. 29 to decide whether it will continue to cut its key interest rates.
Since September 2015, the central bank has launched a rate cut cycle. In a quarterly policymaking meeting held in late June, the bank cut interest rates by 0.125 percentage points, making the fourth consecutive quarter for a rate reduction, to bolster the local economy.
After the latest rate cut, the discount rate now stands at 1.375 percent, the rate of accommodations with collateral at 1.750 percent, and the rate of accommodations without collateral at 3.625 percent.
The current discount rate only trails a historic low of 1.250 percent seen in 2009, when a global financial crisis hit the local economy badly, prompting the central bank to significantly ease its monetary policy and push down interest rates.
Following the four interest cuts in the last 12 months, the market has anticipated that the room for the central bank to further lower interest rates will be limited, analysts said.
They said that since the U.S. Federal Reserve is expected to raise interest rates later in the year, the interest rate spread between Taipei and Washington will be widened further, which could impose an adverse impact on the Taiwan dollar value and lead to fund outflows that will affect the local economy, analysts said.
In addition, the analysts said that the local economy has shown signs of improving, which is expected to prompt the central bank to stop further easing its monetary policy in the upcoming meeting for the third quarter.
In July, the country's outbound sales grew 1.2 percent year-on-year to US$24.12 billion, ending 17 consecutive months of decline, largely on the back of solid demand for electronic devices, in particular, high-end semiconductors.
In addition, Taiwan's composite monitoring indicator increased by three points to 23 in July, the highest it has been since March 2015. The July indicator flashed a green light, indicating stable growth, for the first time in 17 months.
In mid-August, the Directorate General of Budget, Accounting and Statistics raised its forecast of Taiwan's economic growth for 2016 to 1.22 percent from an earlier estimate of a 1.06 percent increase, citing better-than-expected outbound sales and private consumption.
Source: Focus Taiwan News Channel