Analysts were mixed yesterday over whether the central bank should cut interest rates today, with some emphasizing positive signs at large manufacturers and on the local bourse, and others saying the overall economic outlook remained drab.
Jack Huang (黃蔭基), head of research at SinoPac Financial Holdings Co (永豐金控), said the top monetary regulator would probably keep the rediscount rate unchanged after lowering it to 1.25 percent last month from 3.65 percent last September.
Huang said high-tech firms had improved their factory utilization rate following rush orders from China that could continue into the second quarter for some companies.
“Taiwan Semiconductor Manufacturing Co (台積電) in particular may boost its utilization rate to 60 percent in April, 70 percent in May and 80 percent in June,” Huang said by telephone.
While not all makers are benefiting from rush orders, Huang said the central bank would factor in the development at its quarterly board meeting today.
He said Taiwan’s monetary policy was sufficiently loose and countries like Japan, South Korea and Austria have halted rate cuts.
Rick Lo (羅瑋), senior vice president of macroecnomic research at Fubon Financial Holding Co, disagreed, saying that major economic indexes continued to point downward, although at a slower pace than before.
“There is still room for rate cuts since the economic landscape looks gloomy and bumpy ahead,” Lo said by phone.
He said an extra rate cut could also help depreciate the New Taiwan dollar. The local currency has gained NT$1.07, or 3 percent, this month.
He declined to comment on the size of any rate cut, but said he did not believe the rediscount rate would go lower than 1 percent.
Cheng Cheng-mount (鄭貞茂), head economist at Citigroup Taiwan Inc, predicted the central bank would lower the rate by another 0.25 percent for the last time in this series of cuts as the economic downturn was likely bottoming out.
Cheng said the cut would only be a symbolic gesture on the central bank’s part to combat the recession, but a more aggressive move was not necessary because the nation is not suffering a credit crunch.
But Kevin Hsiao (蕭正義), head of UBS Wealth Management Research in Taiwan, said the central bank would leave the rates untouched and save the measure for May, when the Directorate-General of Budget, Accounting and Statistics is due to revise GDP and other data.
“Despite rush orders and rallies in the local bourse, the contraction will persist through the first half,” Hsiao said.
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