TAIPEI (Taiwan News) — Former Deputy Governor of the Central Bank of Taiwan Nan-Kuang Chen (陳南光) criticized Taiwan’s monetary policy in a new book, labeling it as inconsistent and responsible for sparking market volatility.
Chen made the criticisms in the co-authored work “Economists' Views on Central Bank and Monetary Policy - Revisiting the Privilege of Creating Wealth” published on Oct. 8, per Bloomberg. Chen took aim at the bank’s direction under Governor Yang Chin-long (楊金龍), under whom he served as deputy between 2018 and 2023.
He wrote that the lack of a defined monetary policy controlling the inflation rate by buying and selling foreign currency is “just absurd.” “It’s like an oyster omelet (蚵仔煎) without the oysters,” Chen said, referencing a popular Taiwanese snack.
Chen said the central bank's policy responses to “the wave of inflation” that began in 2021 had been “contradictory and chaotic.” In March, the central bank defied many economists' expectations by increasing the interest rate, which Yang described as possibly “a little surprising,” but the right thing to do.
Chen also argued that the central bank relies on too many data points to decide monetary policy, which complicates decision-making. He recommended the bank adopt a clear inflation target for simplicity and greater accountability.
The central bank did not respond to the article reporting Chen's criticisms.
However, Societe Generale Greater China Economist Michelle Lam noted that the central bank has stated a clear inflation target of between 0% and 2%. She said interest rate levels over the long term are more important than the inflation target.
Lam said the bank needs to consider whether a low interest rate is best for Taiwan as the economy is “enjoying a structural AI boom."
