Taipei, The central bank has scheduled its next quarterly policymaking meeting for March 22, with new governor Yang Chin-long (???) to preside over his first meeting since he took office in February.
In a written report to the Legislative Yuan's finance committee ahead of a hearing scheduled for Thursday, Yang said interest rates in Taiwan are still higher than many other economies, but called the country's real interest rates "appropriate," which has prompted the market to conclude the central bank will leave key interest rates unchanged at the upcoming meeting, despite a rate hike cycle in the U.S. market.
At the last policymaking meeting held in December, the central bank decided to maintain its interest rates with the discount rate at 1.375 percent for the sixth consecutive quarter.
If those expectations prove correct, this will be the seventh consecutive quarter the central bank has left interest rates unchanged.
In the report to the Legislative Yuan, Yang , who took over from long-serving Perng Fai-nan (???), said consumer price growth in Taiwan remains stable, citing the consumer price index (CPI) for the first two months of this year at 1.54 percent, well within the 2 percent target range set by the government.
Although the CPI for February rose 2.19 percent from a year earlier, the highest since January 2017, when the index grew 2.24 percent from a year earlier, Yang said the spike was caused by seasonal effects as the Lunar New Year holiday fell in the month, boosting certain expenses such as payments to baby sitters and tourism costs.
In Taiwan, many parents observe the tradition of giving money to babysitters ahead of the Lunar New Year holiday, while tourism expenses usually increase during the local tourism industry's peak season.
Yang said although the effect of a hike in tobacco and alcohol last year will continue to impact consumer prices and the 3 percent wage increase for civil servants, teachers and military personnel starting from Jan. 1 is expected to boost prices, on the whole consumer price growth is expected to stay stable.
According to the Directorate General of Budget, Accounting and Statistics, Taiwan's CPI is expected to grow 1.21 percent in 2018.
Yang's comments further raised hopes that no changes will be made to the central bank's monetary policy at the upcoming quarterly policymaking meeting, market analysts said.
Cathay Financial Holding Co. forecast on Monday that sound economic fundamentals and growing inflation are expected to prompt the local central bank to raise its key interest rates from the second quarter of this year at the earliest.
Cathay Financial has raised also its forecast of Taiwan's economic growth for 2018 from an earlier estimate of a 2 percent to 2.3 percent, citing solid global demand.
Source: Focus Taiwan News Channel