Taiwan’s central bank unlikely to follow Fed’s rate hike

Taipei--Taiwan's central bank is unlikely to follow the U.S. Federal Reserve in raising its key interest rates any time soon, as the local economy has just started to show signs of improvement, economists said Thursday.

The economists added that to continue to speed up the pace of local economic growth, the central bank is very likely to maintain its ample monetary policy in the first half of this year at least, and any rate hike in the local market could be seen next year.

The Fed raised interest rates by 0.25 percentage points Wednesday, saying it is confident in the U.S. economic growth. Fed officials hinted that it will hike interest rates two more times this year, as it had previously anticipated.

The central bank has scheduled a quarterly policymaking meeting for March 23. In the previous quarterly meeting held in late December, the central bank maintained its interest rates, with the discount rate unchanged at 1.375 percent for the second consecutive quarter.

Dachrahn Wu (???), director of National Central University's Research Center for Taiwan Economic Development, said that Taiwan's economic recovery has just kicked off, with momentum in exports, which account for about 60 percent of the country's gross domestic product (GDP), starting to pick up in the second half of last year.

Wu said that it is unlikely that the central bank will follow the Fed in tightening its monetary policy for the moment, as that could slow the pace of the economic growth.

In mid-February, the Directorate General of Budget, Accounting and Statistics raised its forecast for Taiwan's 2017 GDP growth to 1.92 percent from an earlier estimate of a 1.87 percent rise.

Taiwan's exports for February soared 27.7 percent from a year earlier to US$22.66 billion, recording year-on-year growth for the fifth consecutive month.

Wu said that the Fed's latest rate hike had been widely anticipated by the global financial markets, so the move is unlikely to have much impact on the movement of the Taiwan dollar, meaning that there is no need for the central bank to tweak its monetary policy at the moment. He said that the central bank is expected not to tighten liquidity until next year.

Gordon Sun (???), director of the Taiwan Institute of Economic Research's Economic Forecasting Center, agreed, saying that the U.S. remains at an early stage in an interest rate hike cycle and the latest move did not surprise the capital market at all.

Sun said that Taiwan's inflation remains in check, so that it is unnecessary for the central bank to raise interest rates at present.

Last week, DBS, a banking group from Singapore, raised its forecast for Taiwan's 2017 GDP growth to 2.5 percent from 2.1 percent, and expects no change in interest rates in Taiwan in the short term.

Source: Focus Taiwan News Channel