Central bank expected to leave interest rates unchanged: economist

09/14/2020 08:32 PM
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CNA file photo
CNA file photo

Taipei, Sept. 14 (CNA) The central bank is expected to leave its key interest rates unchanged in an upcoming quarterly policymaking meeting scheduled for Thursday amid eased worries over COVID-19 in Taiwan, an economist said Monday.

Wu Meng-tao (吳孟道), director of the sixth research division of the Taiwan Institute of Economic Research (TIER), said that Taiwan has been doing better than many other countries to contain COVID-19 and that the efforts have helped to stabilize the local economy.

Moreover, he said, as the local market remains awash in liquidity and Taiwan's economy has been ascending from a low caused by the spread of the virus, "it is not necessary for the central bank to lower interest rates and pump in more funds at the moment."

In March, the central bank lowered interest rates by 0.25 percentage points, marking the first rate reduction after leaving interest rates unchanged for 14 consecutive quarters at a time when the global economy faced strong headwinds caused by COVID-19. In the quarterly policymaking meeting held in June, the central bank decided to maintain its key interest rates.

Since March, the discount rate in the local market fell to 1.125 percent, a new low in the country's history, flooding the market with money.

"Due to ample liquidity, the local financial market has staged a meaningful rebound. I do not expect the central bank to ease its monetary policy further in the upcoming meeting," Wu said.

As of Monday, the benchmark weighted index on the Taiwan Stock Exchange had bounced back by more than 40 percent from a low seen in March.

While the central bank is likely to leave its monetary policy intact Thursday, analysts said the market is watching closely how the central bank will update its forecast for Taiwan's gross domestic product growth for 2020. In June, the central bank downgraded its forecast to 1.52 percent from an estimate of 1.92 percent made in March.

The analysts said the market is also keeping a close eye on the central bank's attitude toward the Taiwan dollar value against its American counterpart, which is expected to affect Taiwanese exporters' global competitiveness.

Recently, currency dealers said, the central bank was believed to enter the local foreign exchange market in the late trading session almost every day to prop up the greenback and slow down the Taiwan dollar's appreciation at a time of continued foreign fund inflows.

Analysts said the comments from central bank governor Yang Chin-long (楊金龍) on the forex market in the policymaking meeting will be critical to the movement of the Taiwan dollar.

On Monday, the U.S. dollar closed at NT$29.486 against the Taiwan dollar, a two-and-a-half-year low.

(By Pan Tzu-yu and Frances Huang)

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