Major economies from the US to China to Japan have been growing at different rates this year, as monetary policies and economic growth begin to diverge in the post-COVID-19 era.
This contrasts with last year, when developed economies converged in their willingness to aggressively raise interest rates to prevent inflation from running wild, despite the threat of cooling economic growth.
However, there appears to be a widening divergence in central banks’ resolve to overtighten this year, as some are reconsidering the rate hike cycle’s effects on economic growth and employment, while others remain on the lookout for rising inflation.
The division reflects the material differences in economic outcomes across borders and also shows that global central banks’ synchronized interest rate hikes have come to an end.
Taiwan’s central bank maintained its discount rate at 1.875 percent following its quarterly board meeting on Thursday last week, which was in line with market expectations. The pause marks a shift in the bank’s monetary policy after five consecutive rate hikes totaling 75 basis points since March last year.
The move came hours after the US Federal Reserve kept the target range of its Fed funds rate unchanged at 5 to 5.25 percent. It was the first pause in the US central bank’s current rate hike cycle after having raised rates by 500 basis points in 10 policy-setting meetings since March last year.
However, later on Thursday, the European Central Bank raised its three key interest rates by 25 basis points, bringing them to the highest levels in two decades, while signaling more rate increases ahead.
Despite mixed actions by the Fed and the European Central Bank, the Bank of Japan unsurprisingly kept its ultra-low interest rates unchanged on Friday in a move that underlines the bank’s long-term policy of trying to nurture sustainable and stable inflation.
Meanwhile, the central banks of Australia and Canada raised their policy rates by 25 basis points at their monetary policy meetings on June 6 and June 7 respectively, as inflation remained sticky.
However, the People’s Bank of China cut its medium-term lending facility rate — the interest for one-year loans to financial institutions — by 10 basis points to 2.65 percent on Thursday following a 10 basis-point reduction in the key seven-day reverse repo rate to 1.9 percent on Tuesday, after fresh data showed China’s post-COVID-19 recovery was running out of steam.
By absolute value, the magnitude of global interest rate hikes since last year is lower than what it was before the 2008-2009 global financial crisis, but the pace of rate hikes in the past one-and-a-half years has been faster than expected, as monetary policymakers tried to make up for their inflation misjudgement.
The market’s focus has turned to economic growth and whether central banks are prepared to eventually halt rate hikes, or even start to cut rates.
For Taiwan’s central bank, weaker-than-expected GDP data and moderating inflationary pressure are likely to discourage policymakers from implementing further rate hikes by the end of this year, or even in the first half of next year. This could be the beginning of an extended rate pause period, as the likelihood of rate cuts is extremely low in the near term, considering the outlook for inflation in the service sector, which has risen due to increased demand following the end of most COVID-19 restrictions, labor shortages and rising labor costs.
Why is Chinese President Xi Jinping (習近平) not a “happy camper” these days regarding Taiwan? Taiwanese have not become more “CCP friendly” in response to the Chinese Communist Party’s (CCP) use of spies and graft by the United Front Work Department, intimidation conducted by the People’s Liberation Army (PLA) and the Armed Police/Coast Guard, and endless subversive political warfare measures, including cyber-attacks, economic coercion, and diplomatic isolation. The percentage of Taiwanese that prefer the status quo or prefer moving towards independence continues to rise — 76 percent as of December last year. According to National Chengchi University (NCCU) polling, the Taiwanese
It would be absurd to claim to see a silver lining behind every US President Donald Trump cloud. Those clouds are too many, too dark and too dangerous. All the same, viewed from a domestic political perspective, there is a clear emerging UK upside to Trump’s efforts at crashing the post-Cold War order. It might even get a boost from Thursday’s Washington visit by British Prime Minister Keir Starmer. In July last year, when Starmer became prime minister, the Labour Party was rigidly on the defensive about Europe. Brexit was seen as an electorally unstable issue for a party whose priority
US President Donald Trump’s return to the White House has brought renewed scrutiny to the Taiwan-US semiconductor relationship with his claim that Taiwan “stole” the US chip business and threats of 100 percent tariffs on foreign-made processors. For Taiwanese and industry leaders, understanding those developments in their full context is crucial while maintaining a clear vision of Taiwan’s role in the global technology ecosystem. The assertion that Taiwan “stole” the US’ semiconductor industry fundamentally misunderstands the evolution of global technology manufacturing. Over the past four decades, Taiwan’s semiconductor industry, led by Taiwan Semiconductor Manufacturing Co (TSMC), has grown through legitimate means
US President Donald Trump is systematically dismantling the network of multilateral institutions, organizations and agreements that have helped prevent a third world war for more than 70 years. Yet many governments are twisting themselves into knots trying to downplay his actions, insisting that things are not as they seem and that even if they are, confronting the menace in the White House simply is not an option. Disagreement must be carefully disguised to avoid provoking his wrath. For the British political establishment, the convenient excuse is the need to preserve the UK’s “special relationship” with the US. Following their White House
RSS