Taiwan's central bank raised interest rates by 12.5 basis points to 1.75 percent, as expected, saying that the hike would help check inflation expectations. It saw some effect from Japan's quake on Taiwan's industries and said it would factor the event into future rate decisions, but declined to disclose its estimates of what if any damage their might be to the Taiwanese economy.
The central bank has embarked on a gradual raising of rates as its looks to normalise after a long period of loose policy. Analysts expect rises of 12.5 basis points at the remaining meetings this year, with an outside chance of bigger rises. Will not disclose its estimates of effect on Taiwan economy of Japan disaster.
DONNA KWOK, ECONOMIST, HSBC (HONG KONG) "Taipei was one of the earliest to start hiking rates, so is more ahead than behind the curve in our view. "We expect the CBC to maintain its gradual 'bite sized' pace of monetary normalisation, hiking by 12.5bp in each of the remaining quarters this year for three reasons: (1) CPI inflationary pressures remain subdued as businesses aren't fully passing on higher global energy/food prices yet; (2) until the full impact of events in the Middle East on global oil prices and the global economic recovery unfold, it's too early to take the exports recovery for granted yet; (3) the CBC will wait to assess the full impact of a proposed luxury tax on property buyers and recent tightening of bank mortgage lending before accelerating its rate hike cycle as the key means for cooling the property market."
"The comments are not hawkish at all, the central bank is trying to present a balanced view by talking about modest inflation and effective mortgage measures. "There was speculation the central bank would raise reserve ratios too, but I think it is starting to be more cautious because of the impact from Japan's quake. "The rate rise should have no impact on the market as it has already been priced in. We maintain our forecast that the interest rate will rise by 25 basis points in Q2."
JOANNA TAN, ECONOMIST, FORECAST (SINGAPORE) "The move is in line with market and our expectations. Inflation in Taiwan is not as worrying as other parts of Asia and continuing with the modest tightening should keep prices well contaReuters. "However, with the economy's recovery uneven, the central bank is not going to engage outright hawkish gears going forward and we are looking for another 37.5 basis points of rate hikes for the rest of the year. "They will still keep to modest rate hikes, nothing too aggressive due to economic considerations about Japan's impact."
WAI HO LEONG, REGIONAL ECONOMIST, BARCLAYS CAPITAL, SINGAPORE "I think this is a recognition that the event in Japan is really an inflation shock not a significant growth shock, so I think with inflation momentum in Taiwan already accelerating it is quite likely the central bank will continue to hike rates.
"Inflation is no longer confined to the headline. We have seen core inflation momentum starting to accelerate. I think this is something that will register a lot of concern. I think this time they will signal more concern on inflation, particularly core. On asset prices, they will only use prudential measures again. "We are looking for policy rate to end the year at about 2.125 percent, so one rate hike every quarter."
Comments
Comments are closed for this article.