Taiwan's central bank left its policy rate unchanged on Thursday, amid worries that global trade frictions could hurt the export-reliant economy. As expected, the central bank's latest policy review kept the discount rate at 1.375 percent, where it has stood since June 2016.
Taiwan's economic growth has been largely resilient to the trade tensions between China and the United States, its two biggest export markets, but the central bank was monitoring the impact, as there were signs that the tariff war had begun to hit growth elsewhere. The Sino-US trade war could disrupt global supply chains, posing a risk to Taiwan's tech sector, in particular.
"So far the Sino-US trade frictions have had limited impact on Taiwan," Central Bank Governor Yang Chin-long told a news conference following the policy review. "Trade frictions will affect China's economy," Yang said. Both China and the US are very important to us." Some analysts doubted whether Taiwan would raise interest rates this year as a tighter policy could hurt the island's export competitiveness at a time when the tariff war was escalating.
"With economic growth likely to remain decent over the quarters ahead and price pressures contained, we don't think policymakers will be in any rush to adjust policy," Chang Liu, economist in Capital Economics said in a research report. The central bank revised its forecast for economic growth this year to 2.73 percent from the June forecast of 2.68 percent, and said it would maintain appropriate loose monetary policy to support growth while forecasting economic expansion would slow to 2.48 percent next year.