Economy
Taiwan set to hold rates steady as inflationary pressure eases, exports remain weak
Taiwan’s central bank is expected to leave its policy rate unchanged this week, according to most economists polled by Reuters, as inflationary pressures ease and the island’s export-driven economy faces weak external demand.
The central bank is likely to keep the benchmark discount rate at 1.875% at its quarterly meeting on Thursday, according to 19 of 23 economists surveyed. At the last meeting, in March, the bank unexpectedly raised the rate by 12.5 basis points to its current level.
Four of the economists surveyed expected the central bank would lift the rate by 12.5 basis points to 2.0%.
Looking ahead, the median forecast among those polled was for the central bank to keep the rate at 1.875% for all of 2023 and half of 2024 before cutting it to 1.75% in the third quarter of that year.
Inflation has been coming down, with Taiwan’s consumer price index 2.02% higher in May than a year earlier, coming in below economist expectations and hitting its lowest level in nearly two years.
“CPI year-on-year growth for May was significantly lower than market expectations,” said analyst Chengyu Liu of First Capital Management. “This may result in a 50/50 chance the central bank will decide to pause interest rate hikes in June.”
But if the U.S. Federal Reserve, also meeting this week, raises rates, Taiwan will likely follow suit, Liu added.
Taiwan’s exports in May fell on an annual basis for a ninth consecutive month in a symptom of anaemic demand for the island’s tech products from China and global markets, with matters not expected to improve until the third quarter.
However the domestic economy is doing much better, with unemployment reaching a more than two-decade low in April.
Taiwan is a major producer of semiconductors used in everything from cars to smartphones, but with global consumer demand hit by high inflation and impact of the war in Ukraine, Taiwan’s economy entered recession in the first quarter.
The central bank will give its revised forecast for 2023 GDP growth on Thursday. In March, it forecast a 2.21% expansion, down from a previous prediction of 2.53%.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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