Taiwan’s central bank held its key interest rate unchanged for the fifteenth policy session in a row on Thursday, citing brighter economic outlook amid low inflation and improving labor market conditions.
The Board of the Central Bank of the Republic of China (Taiwan) left its key rate unchanged at 1.875 percent. The decision was in line economists’ expectations.
“Domestic economy improves steadily, and inflation is low and stable with a temporary softening in inflation expectations,” the bank said in a statement. “Against this backdrop, the Board judges that a policy rate hold will help maintain price and financial stability and foster economic growth.”
The previous change in the discount rate was a 12.5 basis points hike in June 2011.
The bank said that positive results from a series of measures it took since June 2010 to rein in banks’ real estate-related risks, and the government’s policy efforts towards a reasonable property tax levy, have successfully helped restrain activity in the housing market and expectations for rising housing prices.
Regarding the risk of spillovers from monetary easing abroad, especially in the U.S., the bank said it will intervene in the currency market to stabilize the situation if seasonal or irregular factors, such as massive inflows or outflows of short-term capital, lead to excessive volatility and disorderly movements in the NT dollar exchange rate with adverse effects for the economy.
The central bank expects private consumption and investment to pick up in coming quarters. Turning to inflation, the bank said that the effect of an oil price slump on domestic prices will likely gradually abate. Consumer prices declined 0.19 percent annually in February.
“Although the economy seems to have lost some momentum over the past few months, prospects for the coming year are very good, with low oil prices and stronger growth in the US set to provide a sizable fillip to the economy over the coming months,” Capital Economics economist Gareth Leather said.
“Inflation is almost certain to rebound toward the end of the year. Core inflation, which is a better measure of underlying inflation, has been stable in recent months.”
Capital Economics expect policy settings to be left unchanged until at least the end of 2016.
The material has been provided by InstaForex Company – www.instaforex.com