Taiwan's central bank left its benchmark discount rate steady at 1.375 percent "against a backdrop of moderate global growth and renewed momentum for the domestic economy, along with a mild inflation outlook for next year."
The Central Bank of the Republic of China (Taiwan) (CBC), which has cut its key rate four times since September 2015 by a total of 50 basis points, forecast the inflation rate would rise slightly to 0.60 percent in the fourth quarter of this year to average 1.12 percent for 2016, slightly up from its June forecast of 1.09 percent.
Taiwan's inflation rate eased to 0.57 percent in August from 1.23 percent in July and with "no signs of strong domestic demand" and low raw materials prices the central bank said the inflation outlook for 2017 was "expected to be mild."
Taiwan's economy is improving with Gross Domestic Product returning to positive territory in the second quarter following three consecutive quarters of contraction.
The CBC said exports grew in July and August and the government's budget, accounting and statistics office forecasts growth of 2.38 percent in the fourth quarter and 1.22 percent for the full year, up from its previous forecast of 1.06 percent.
For 2017 growth is seen rising further to 1.88 percent as exports continue to improve along with a "mild" increase in private consumption and investments.
Taiwan's GDP grew by 0.15 percent in the second quarter from the first quarter for annual growth of 0.7 percent following declines of 0.29 percent, 0.89 percent and 0.8 percent, respectively, in the previous three quarters.
The central bank confirmed its policy of maintaining an "orderly" foreign exchange market in the event of "excess volatility and disorderly movements," adding that easing by major advanced economies, along with uncertainty over the U.S. Federal Reserve's rate hike, had "induced massive, erratic cross-border capital movements and increased fluctuations in the NT dollar exchange rate."
After declining from May 2015 to mid-January, the Taiwan dollar has been appreciating steadily against the U.S. dollar and was trading at 31.4 to the dollar today, up 5 percent this year.
The Central Bank of the Republic of China (Taiwan) issued the following statement: