Taiwan central bank stands pat on rates as inflation remains mild

Taiwan's central bank kept its policy rate unchanged on Thursday, as inflationary pressures remain mild in spite of healthy export growth and improving consumption. As expected, the central bank kept its discount rate steady at 1.375 percent for the sixth consecutive quarterly meeting. It had cut the rate four times in a row from late 2015 to help lift the trade-reliant economy out of a mild recession.
"Since the last governors' meeting in September, the global economy has seen growth across the board, and the outlook for next year is also stable," the central bank said in a statement. It will maintain appropriate loose monetary policy, the central bank said, adding that there were uncertainties in the global economy and financial conditions.
All 16 analysts surveyed in a Reuters poll had expected no change in the policy rate. The central bank said inflation was expected to be mild and stable against a backdrop of rising pressure, with the 2018 consumer price index forecast to rise 1.12 percent.
Taiwan's GDP is expected to grow 2.35 pct next year, the central bank added, slightly higher than the statistics agency's projection in November. GDP growth for 2017 was expected to come in at 2.61 percent, the central bank said. Some analysts expect the Central Bank of the Republic of China (CBC) to maintain its monetary policy stance in the near term, possibly raising rates in the second half of 2018 on stronger economic growth.
"There is little urgency for the CBC to raise rates. Despite the recent pick-up in GDP growth, the output gap remains slightly negative and inflation pressure remains muted," DBS economist Ma Tieying said in a research note ahead of the policy review.
Trade-reliant Taiwan has benefitted from the launch of new tech gadgets especially in the second half of the year. January-November export orders reached $444.3 billion, a historical high for the period, the economics ministry said on Wednesday.
New product rollouts such as Apple Inc's iPhone 8 and iPhone X, are likely to keep the island's contract manufacturers busy throughout the fourth quarter and into the beginning of next year, analysts have said. Carl Liu, an analyst at KGI Investment Advisory, told Reuters he expects the central bank will increase rates at the earliest in the third quarter of next year.