Central bank says key interest rates to remain the same

By Christine Chou, The China Post

TAIPEI, Taiwan — The Central Bank of the Republic of China (Taiwan) has kept its benchmark interest rates steady for a second straight quarter, a move in line with market expectations. The discount rate — the rate at which the central bank lends to financial institutions for short-term purposes — will remain unchanged at 1.375 percent. The rate of accommodations with collateral has been held at 1.750 percent and the rate of accommodations without collateral at 3.625 percent. Perng Fai-nan (彭淮南), the central bank’s governor, said rates had been kept steady due to mild inflation prospects and an overheated economy.

The central bank said in its statement that it expects a mild economic recovery next year with a stable outlook and limited inflation pressure.

Global trade is expected to increase next year — giving a boost to exports — while the government would step up its investments on public infrastructure, driving more private investments, the central bank said. But it warned workers that, despite declining unemployment and an improving labor market, next year would bring limited wage growth. The Directorate-General of Budget, Accounting and Statistics (DGBAS, 主計總處) forecast 1.87 percent GDP growth in 2017. Global Uncertainties The central bank said it will monitor the global situation for economic uncertainty, including U.S. President-elect Donald Trump’s policies, potential U.S. Federal Reserve rate hikes, the impact of Brexit, and the growing influence of anti-globalization movements.

Any adoption by the U.S. of protectionist policies would harm Taiwan, Perng said. “Though international organizations predict next year’s global economic growth will be an improvement on this year, there are still many uncertainties. In consideration of slower growth in domestic economic recovery and a persistent, large output gap, the central bank believes through holding monetary policy rates and broad M2 money supply growth (2.5 to 6.5 percent), continuing monetary easing would be the most appropriate action for driving economic growth,” the statement said. Responding to whether the current administration had sought his advice, Perng said he attended a national security meeting with President Tsai Ing-wen on Wednesday after diplomatic ally Sao Tome cut ties, but declined to comment further.