Taiwan c.bank seen standing pat on rates again as economy booms

Taiwan’s central bank will likely keep its policy rate steady at a record low this week as the economy booms on global tech demand fuelled by the work-from-home trend, despite a spike in COVID-19 cases at home, a Reuters poll showed.

The central bank is seen leaving the benchmark discount rate (TWINTR=ECI) unchanged at 1.125% on Thursday at its quarterly meeting, all 14 economists in the poll said, after holding fire at its past four meetings. It last cut the rate in March of 2020.

Taiwan’s export-reliant economy has been supported by global demand for tech products from an increasing number of people working and studying from home during the COVID-19 pandemic.

Economic growth in the first quarter rose 8.92% from a year earlier, the strongest quarterly growth in over a decade.

However, while Taiwan had had the pandemic well under control, it has in recent weeks been dealing with a spike in domestic infections, leading the government to curb gatherings and close schools and entertainment venues.

But case numbers are now falling and the crucial semiconductor industry has been largely unaffected.

Tai Hsi-ting, an analyst at Cathay Securities in Taipei, said that even with the impact of the pandemic Taiwan’s economy was doing well so there was no cause to raise rates.

“If the central bank raises interest rates at this time, it will drive the Taiwan dollar to rise, which in turn will affect the profitability of manufacturers,” Tai said.

The central bank will also give its own revised forecast for economic growth this year on Thursday, having predicted a 4.53% expansion at its last quarterly meeting in March, with exports performing strongly.

Taiwan’s manufacturers, including Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (2330.TW), the world’s largest contract chip maker, are a key part of the global supply chain for technology giants such as Apple Inc (AAPL.O).

Our Standards: The Thomson Reuters Trust Principles.

Source: https://www.reuters.com/world/asia-pacific/taiwan-cbank-seen-standing-pat-rates-again-economy-booms-2021-06-15/