Central bank unlikely to change interest rates: economists

03/02/2019 02:29 PM

Taipei, March 2 (CNA) Taiwan's central bank is expected to maintain its current interest rates when it holds its quarterly policymaking meeting on March 21, economists said Saturday.

Although the domestic economy has been showing signs of a slowdown, it does not warrant an interest rate cut anytime soon, two local economists said.

At its last quarterly policymaking meeting in December 2018, the central bank kept the discount interest rates at 1.375 percent, the rate on accommodations with collateral at 1.750 percent, and the rate on accommodations without collateral at 3.625 percent, for the 10th consecutive quarter.

Norman Yin (殷乃平), a professor in the Department of Money and Banking at National Chengchi University, said the domestic economy is unlikely to plunge anytime soon, despite a slowdown, so it is not necessary for the central bank to loosen its monetary policy right now to stimulate the economy.

The central bank needs to keep an eye on the global financial markets before making any decision to adjust its monetary policy, he said, adding that liquidity levels worldwide remained high.

Wu Meng-tao (吳孟道), an economist at the Taiwan Institute of Economic Research (TIER), said that even if the central bank were to cut interest rates to boost liquidity, it would not be beneficial because of the shortage of investment opportunities in Taiwan.

It would be best if Taiwan could seek to improve its investment environment and boost its global competitive edge, he said.

The central bank would be wise to maintain its current monetary policy as domestic consumer price growth is low but there is no immediate concern over deflation, Wu said.

According to the central bank, the consumer price index is expected to grow at a rate of 1.05 percent in 2019, compared with1.35 percent in 2018.

In December, the central bank downgraded Taiwan's 2019 economic growth forecast from 2.48 percent to 2.33 percent, citing external uncertainty amid trade frictions between the United States and China and a slowdown of the world's major economies, which had reduced global demand to the detriment of Taiwan's export-oriented economy.

In mid-February, the Directorate General of Budget, Accounting and Statistics lowered its forecast for Taiwan's 2019 economic growth to 2.27 percent from an earlier estimate of 2.41 percent.

(By Pan Tzu-yu and Frances Huang)


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