All of the Taiwanese central bank’s board members last month agreed on a rate hold despite healthy GDP growth, as unease linked to US President Donald Trump’s potential trade policy builds, meriting a wait-and-see approach, the minutes of last month’s board meeting showed on Friday.
A rate hold would be the appropriate decision, as a rate cut is not advisable given the introduction of carbon pricing, and pay raises in public and private sectors would drive up price pressures, one board director said.
A rate hike could not be justified given that the US Federal Reserve and the European Central Bank are embarking on rate cuts, the director said.
Photo: Ann Wang, REUTERS
A trade dispute looms as the Trump administration has threatened the use of tariffs to solve trade imbalances and other cross-border disputes, which would dampen global goods flows, another board director said.
The central bank said it was looking at GDP growth of 3.13 percent this year without yet factoring in potential tariff hikes, adding that consumer prices would return to the 2 percent target.
The top monetary policymaker said it would need more time to observe the Trump administration’s policies and would unveil its assessments in March or June.
Research bodies at home and abroad have mixed views over the impact of Trump’s trade and immigration policies, so it is better to be cautious about monetary policy actions, another board director said.
Frontloading on the part of foreign customers likely helped account for Taiwan’s strong exports in recent months, which was also seen during Trump’s first four-year term, the director said, adding that the phenomenon could also pose a challenge to the central bank’s economic analysis and monetary policy action.
Another board director voiced concern over Taiwan’s lingering uneven economic recovery in light of tepid global demand for non-tech products, attributable to China’s overproduction and weak domestic demand.
A rate hike would have negative implications for Taiwan’s industries except for firms supplying electronic components used in the development of artificial intelligence, the director said.
Other board directors rallied behind a rate hold, citing worry over continued rent hikes.
Rent hikes alone contributed 0.39 percent to the inflation reading in November last year and might make a bigger contribution last month, lending support to a tighter monetary stance, one director said.
Another director said major central banks around the world would likely be more prudent in dealing with rate adjustments, as the shadow of trade disputes grows larger ahead.
Board directors agreed there was no need to introduce new credit controls in curbing real-estate lending, as the housing market slowed and presale home prices cooled.
It would be appropriate for the central bank to halt new control measures and closely monitor the market, one director said.
The central bank and the Financial Supervisory Commission pledged to step up inspections of mortgage operations to make sure local lenders avoid loan concentrations.
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