Resolution of the Joint Meeting of the Central Bank of China
I. International economic and financial situation
Since the Board meeting of the Bank in December (2018), global trade and manufacturing activities have continued to cool down. International institutions have generally revised their global economic growth forecasts for 2019, and the economic growth of major countries has slowed down. As the expansion of the economy has slowed down and the international oil price is expected to be lower than the previous year, the global inflation outlook is moderate.
Recently, the policy rates of major economies have remained unchanged, but the monetary policy stance has tended to be looser, and the US-China trade negotiations have been developing positively, and the international financial market has stabilized. Looking ahead, the United States still has uncertainties about the trade policies of major economies such as China, Europe and Japan. The mainland's economic downturn and the Brexit deadline are expected to be postponed, and the global economic and financial outlook is still variable.
Second, the domestic economic and financial situation
(I) Since the beginning of the year, due to weakening of external demand, domestic exports have experienced negative growth and affected production activities; however, the import of capital equipment has increased, and Taiwan stocks have stabilized with the international stock market, driving consumer confidence to rebound and the economy continues to grow moderately. The labor market is stable, the number of employed people is slowly increasing, and the unemployment rate is slightly lower.
In view of the expected slowdown in global economic and trade activities this year, due to the influence of the base period of the previous year, Taiwan's export growth will slow down this year. However, domestic recurring wages continue to increase, the government has introduced incentives for consumption, and private consumption is expected to grow steadily; the government will actively promote forward-looking infrastructure and Taiwanese investment in Taiwan, and public and private sector investment will continue to grow. Driven by domestic demand, the Bank predicts that economic growth this year will be warming up quarter by quarter. The annual economic growth rate is 2.13%, lower than the previous year.
(II) From January to February of this year, the average annual growth rate of the consumer price index (CPI) was 0.20%, and the annual growth rate of core CPI without fruits and vegetables and energy was 0.41%, which was a moderate increase.
Due to the high prices of fruits and vegetables in the previous year, the price of fruits and vegetables such as fruits and vegetables may increase significantly this year. At the same time, the increase in basic wages will drive up wages and food expenses. However, it is expected that international oil prices will be lower than the previous year and slow down the import. Inflation pressure, benefiting from moderate domestic demand, and the disappearance of tobacco tax increase, the inflation outlook is stable. The Bank forecasts that the annual growth rate of CPI and core CPI for this year is 0.91% and 0.78%, respectively (Detailed Table 1).
(3) At the beginning of this year, in response to the demand for funds for the Lunar New Year, the Bank provided sufficient liquidity in the market through open market operations; from January to February, the average excess reserve portion of the bank increased from an average of 4 billion yuan in the fourth quarter of last year to 5 More than one billion yuan, the long-term and short-term interest rates have fallen slightly in recent months.
From January to February of this year, the average annual growth rate of M2 and monetary reserves was 6.78% and 3.03% respectively. During the same period, the average annual growth rate of bank loans and investment was 5.70%, indicating that currency credit is sufficient to support economic growth. In recent months, the domestic bank's over-release ratio was 0.24%, and the allowance for bad debts remained at a high level of 569.56%. The bank's assets were of good quality.
3. The Board of Directors unanimously decided to maintain the policy interest rate unchanged.
Taking into account the economic and financial situation at home and abroad, considering the revision of the global economic and trade growth forecast this year, the prospects for international economic and trade finance are still uncertain, and the domestic economic growth is slightly slow, and the actual output is still lower than the potential output. The inflationary pressure is expected to be moderate; compared with the major economies, the domestic nominal interest rate and the real interest rate are still in the middle (see Figure 1, Schedule 2). The Board of Directors of the Bank believes that the policy interest rate remains unchanged and the moderately loose currency is continued. The policy will help the overall economic and financial development.
The Bank's re-discount rate, guaranteed lending rate and short-term financing interest rate maintained annual interest rates of 1.375%, 1.75% and 3.625%, respectively.
4. The Bank will continue to pay attention to domestic inflation, economic growth and changes in financial situation, and pay close attention to the development of global economic and trade activities, the direction of monetary policy in major economies, and the possible impact of capital movement on domestic economic and financial development. Appropriate monetary policy to achieve the statutory duties of the Bank.
5. The exchange rate of the New Taiwan dollar is determined in principle by the supply and demand of the foreign exchange market. However, if there are irregular factors (such as the inflow and outflow of short-term funds) and seasonal factors, resulting in excessive exchange rate fluctuations or disorderly changes, and there is a disadvantage to economic and financial stability, this The line will maintain its order in the foreign exchange market.
Source: Central Bank Of the Republic Of China (Taiwan)