While the nation's monetary policymaker has not aggressively raised the benchmark interest rate as some economists had predicted, it will continue to tighten fiscal policy for the remainder of the year in order to fight inflationary pressures, analysts said yesterday.
The central bank announced yesterday it was raising the discount rate by 12.5 basis points to 3.625 percent, its 16th consecutive quarterly increase since October 2004.
In addition, the central bank announced it was lifting the reserve requirements for passbook deposits by 1.25 percentage points and the reserve requirements for time deposits by 0.75 percentage points, in a bid to curb excessive liquidity in the banking system, the central bank said in a statement.
The central bank also adjusted downward its target zone for aggregate M2 money supply growth to a range between 2 percent and 6 percent for the remainder of the year, from its previous range of 3 percent to 7 percent to reflect diversified portfolio allocations and a decreasing demand for cash because of expectations of rising inflation.
The central bank “seems to be trying to convince the public that it is in top gear in the fight against inflation,” Citi Investment Research economist Cheng Cheng-mount (鄭貞茂) wrote in a research note yesterday.
Cheng had predicted a rate hike of 0.25 percent by the central bank before yesterday’s board meeting.
Central bank governor Perng Fai-nan (彭淮南) told a press briefing following the board meeting that the bank’s rates had reached a “neutral” level. It “hinted that future monetary policy will probably focus more on controlling the ‘quantity’ of money instead of focusing on the ‘price,’” Cheng wrote.
Like elsewhere in Asia, the latest rate increases by Taiwan’s central bank reflected a cross-border concern among regional monetary policymakers about upside inflationary risks on the back of rising oil and food prices.
The government’s latest consumer price index data showed inflation grew 3.71 percent year-on-year last month, following a rise of 3.85 percent in the previous month.
But inflation is likely to rebound significantly following the recent announcement of more fuel and electricity price increases and Deutsche Bank’s economics research unit yesterday predicted the central bank would “remain vigilant and maintain the tightening bias” until end of the year, it said in an e-mailed statement.
Cheng forecast that the central bank would implement two more rate increases of 0.125 percentage points following the board meetings in September and December.
Other tightening measures are also likely to materialize. Cheng said any additional measures could negatively affect domestic sentiment, especially on the stock market, in light of the increased global economic uncertainty. But the impact on the foreign exchange market would likely be more muted, he said.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US
RSS