Taiwan Central Bank Minutes Show no Rush to alter Rates

The central bank last month left its policy rate unchanged at 1.125%, the lowest on record, and raised its growth outlook for 2020 as strong exports bolstered the trade-reliant economy in the face of the coronavirus pandemic.

All board directors supported keeping policy rates unchanged at the meeting, based on the assessment of a mild inflation pickup, moderate economic growth, and ample market liquidity for 2021, the minutes show.

Two board members “noted that against the backdrop of moderate economic growth and expected inflation rebound next year, as well as a historically-low interest rate level, a policy rate reduction would not be productive”, it said.

Two other board directors also noted the “possible effects of persistent low rates on an economy’s resilience and economic and financial development”.

The strength of the Taiwanese dollar also weighed, an area of persistent concern for the central bank as it makes exports more expensive.

One board member said the Taiwanese dollar’s recent strength had left no room for a rate rise, as higher rates would impose further pressure for the currency to appreciate more.

Taiwan, a key part of the global technology supply chain, has avoided the lockdowns seen elsewhere and its economy has performed better compared with many countries in Asia, as early measures prevented a rapid spread of COVID-19.

The central bank in December raised its 2020 forecast for gross domestic product growth to 2.58% from the 1.6% predicted in September. It said it saw this year’s growth at 3.68%, compared with 3.28% seen at its prior quarterly meeting.

The government will give preliminary figures for fourth- quarter and full-year GDP on Friday, with economists polled by Reuters predicting a 3.61% growth rate for the last quarter of 2020.

(Reporting by Liang-sa Loh and Ben Blanchard, editing by Larry King)