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Central bank unlikely to adjust interest rates: economists

Central bank unlikely to adjust interest rates: economists

Taipei, March 28 (CNA) Taiwan's central bank, which just kept its key interest rates unchanged for the 15th consecutive quarter, is unlikely to raise rates any time soon because of the ongoing need for liquidity to sustain growth, economists said Saturday.
Other economists said there was also no room for the central bank to cut interest rates because domestic rates are already low, even if neighboring countries such as China and South Korea have lowered rates to stimulate their economies. The central bank decided on Thursday to leave its discount rate unchanged for the 15th consecutive quarter at 1.875 percent. Liang Kuo-yuan (???), president of the Yuanta-Polaris Research Institute (???????????), is one of the economists who does not foresee the central bank tightening monetary policy by raising rates even if the U.S. Federal Reserve kicks off a rate hike cycle later in the year. Liang said that while Taiwan's economy will continue to grow this year at a quicker pace than last year, the growth will not be solid enough to allow the central bank to tighten liquidity. On Wednesday, Yuanta-Polaris raised its forecast for Taiwan's gross domestic product (GDP) growth for 2015 to 3.66 percent from a previous estimate of a 3.45 percent rise, but that was lower than the 3.78 percent growth projected by the government. The think tank said that if the current drought deteriorates further, forcing tougher water rationing measures, Taiwan's manufacturing sector, and consequently economic growth, will be affected. The central bank will also refrain from raising interest rates, Liang said, because inflation is not a concern in Taiwan at present. According to the Directorate General of Budget, Accounting and Statistics, Taiwan's consumer price index is expected to rise only 0.26 percent in 2015, compared with a 1.20 percent rise in 2014, largely because of lower fuel and electricity costs. Another economist did not see lower rates in the cards, either.
Norman Yin, a professor in National Chengchi University's Money and Banking Department, said one of the central bank's priorities is to maintain a stable monetary policy, which is a pillar of the country's economic growth. So even though China and South Korea have lowered interest rates, Taiwan does not have to follow suit because its rates have been low enough to help local markets remain awash in liquidity, Yin said. While Yin expects the central bank to continue to maintain its monetary policy and keep liquidity strong, he advised investors to note when the Fed will start to raise interest rates because the move will affect flows of foreign funds in and out of the local market.
Many analysts anticipate that the U.S. central bank will launch a rate hike cycle in June or September. (By Chen Cheng-wei and Frances Huang)


Updated : 2021-09-27 06:57 GMT+08:00