Taiwan maintains discount rate at 1 3/8% on ‘robust’ global expansion

By Wendy Van Sickle

Columbus, Ohio, June 21 – The Central Bank of the Republic of China (Taiwan) decided unanimously to maintain the discount rate at 1 3/8% at its meeting on Thursday, according to a press release.

The bank’s board also decided to keep the rate on accommodations with collateral at 1¾% and the rate on accommodations without collateral at 3 5/8%.

The bank said that since its last meeting in March the global economy has “experienced a robust expansion.”

Among major economies, growth in the United States has accelerated, whereas the euro area, Japan and China have shown signs of slight moderation. An uptrend in commodity prices including oil prices has led global inflation to rise.

Meanwhile, the bank said, markets expected a faster pace of the U.S. Fed's rate hikes, and trade conflicts between the United States and China raised concern. These developments have induced capital outflows and declines in stock prices and currency values in some emerging market economies, heightening volatility in global financial markets.

The Fed announced another rate increase last week, but its policy stance remains accommodative, the bank noted. The European Central Bank decided to phase out its asset purchase program by the end of the year and maintain policy rates at present levels at least until the summer of 2019, while central banks in Japan and China both kept their policy rates unchanged, indicating that major economies still held an accommodative monetary policy stance.

Domestically, for the year to date, exports have posted solid growth and private consumption has picked up. During the second half of the year, it is expected that export growth momentum may soften because of a higher base effect.

The increase in international oil prices since the last meeting was larger than expected, pushing up domestic import prices.

Also, rising vegetable prices and the hike in cigarette prices also contributed to a greater increase in CPI inflation in recent months. For the first five months of the year, the average CPI annual growth rate was 1.66%, while core inflation, excluding vegetables, fruit, and energy items, averaged 1.4%, suggesting inflationary pressures remain mild.

In the second half of 2018, the annual growth rate of CPI is expected to moderate to 1.21%. The CBC has upwardly revised its forecast of CPI inflation to 1.4% and revised its core CPI forecast downward to 1.16%.

Amid the mild inflation outlook for 2018 and gentle rises in domestic prices, the bank said it judged that a policy rate hold and a continued accommodative monetary policy stance will help ensure price stability and foster steady economic and financial development.

© 2015 Prospect News.
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