Taiwan's central bank left its benchmark discount rate at 1.375 percent, as expected, saying an "adequately accommodative monetary policy stance is conducive to the economic recovery," while inflationary pressures remain mild although a stronger Taiwan dollar is straining financial conditions.
The Central Bank of the Republic of China (Taiwan) (CBC) also said its policy decision took into account "elevated uncertainties" over U.S. and European economic policies, a gradual domestic recovery and the fact that output is still below potential output.
The CBC has maintained rates since June 2016 following four consecutive rate cuts by a total of 50 basis points starting in September 2015. The central bank decides on monetary policy at the end of each quarter.
Noting that Taiwan's government had approved a infrastructure development plan that is expected to create jobs and bolster productivity, the CBC called on governments around the world to follow suit with fiscal easing and structural reforms as stimulus created by monetary easing after the global financial crises had now faded.
"The current low-growth, low-rate environment would also prevent fiscal stimulus from crowding out private investment," the central bank said.
Taiwan's dollar has been firming since January last year and the while the CBC said this was helping keep down imported inflation it also confirmed that it would step into foreign exchange markets to maintain an orderly market if there were excess volatility and "massive and erratic cross-border capital movements" from political and economic changes that could disrupt the country's foreign exchange and financial markets.
Taiwan's dollar was trading at 30.49 to the U.S. dollar today, up 8.1 percent since the start of 2016 and up 6.4 percent this year.
Taiwan's inflation rate plummeted to minus 0.04 percent in February from 2.25 percent in January due to lower food prices but the CBC said average consumer price growth in the first two months of this year was 1.09 percent and forecast average inflation of 1.25 percent this year and 1.06 percent core inflation as moderate domestic demand and a negative output gap helps keep inflation mild.
Taiwan's exports, which accounts for about 60 percent of Gross Domestic Product, have been picking up speed since the start of this year and the government's directorate last month raised its 2017 growth forecast to 1.92 percent from 1.87 percent, up from 2016 growth of 1.50 percent.
The Central Bank of the Republic of China (Taiwan) issued the following statement: