At its quarterly policy meeting, the central bank held Taiwan’s discount rate and rates on accommodations with and without collateral at 1.875 percent, 2.25 percent and 4.125 percent, respectively. The rates have remained at current levels since July 2011.
Perng Fai-nan, central bank governor, said the decision to adopt a “moderate easing policy” will help stabilize price levels and maintain financial stability in Taiwan.
“The international economy is still under pressure as the eurozone struggles with a recession, U.S. growth loses momentum and the mainland Chinese economy slows,” he said.
Weakening global demand is taking its toll on Taiwan’s exports, with shipments down 5.6 percent for the first eight months of the year and private investment and consumption dipping, Perng added.
Despite a spike of 2.94 percent in last month’s consumer price index, caused by higher produce costs during the July-August typhoon season, Perng said Taiwan’s price levels remain in check.
“But the U.S. Federal Reserve’s recent decision to roll out more quantitative easing has triggered concerns of rising inflation and short-term capital flows into emerging markets.”
Perng, who views the U.S. move as less aggressive compared to the previous two rounds, said pushing a wall of money abroad could lead to punishing appreciation of many Asian currencies and trigger market irregularities.
Although the New Taiwan dollar’s exchange rate is determined by the market, Perng said the central bank stands ready to take action as required to maintain financial order. (JSM)
Write to Meg Chang at sfchang@mofa.gov.tw