The central bank yesterday kept its policy interest rates unchanged for the second consecutive quarter, saying the nation’s economy is experiencing stable growth, but the pace is not fast enough to merit a policy change.
“The board meeting decided to maintain a loose monetary policy stance as uncertainty over the global economy lingers,” Governor Perng Fai-nan (彭淮南) told a news conference in Taipei.
Benign inflation, forecast to rise to between 1 percent and 1.5 percent by different research institutes, means there is no urgency in ending the “status quo,” the central bank said.
Photo: Wang Yi-sung, Taipei Times
The decision means the bank’s discount rate remains at 1.375 percent, the collateralized loan rate at 1.75 percent and the unsecured loan rate at 3.625 percent.
Economists have said the central bank would maintain its rates for at least another six months, allowing the export-focused economy more room to recover from the slowdown in China and a mixed showing in the eurozone.
Mega Securities Co (兆豐證券) economist Lucas Lee (李志安) said the bank might keep its policy rates unchanged in the first half of next year because it needs time to judge US president-elect Donald Trump’s effect on the global economy.
“If Trump pushes for infrastructure investment, this will drive US economic growth, which in the short term would benefit the global economy,” Perng said.
However, Perng voiced concern over political uncertainty and growing protectionism.
Taiwanese trade would be damaged if the US adopts protectionist policies, he said.
Income gaps have widened amid the trend of globalization and several nations, notably the US, have indicated adjustment plans, but a reverse course might do more harm than good and Taiwan would suffer seriously given its deep participation in the global supply chain, he said.
As domestic companies have turned from capital-seekers to suppliers over the years, slowing business activity has created more idle funds and the central bank urged the government to use the nation’s excess savings to fund public construction works.
As of September, the life insurance industry had investment funds valued at NT$19 trillion (US$593 billion), with only NT$200.4 billion being used for special and public construction projects, Perng said, adding that assorted pension funds have another NT$3.9 trillion funds that should be better utilized.
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