Economic Analysis - Remaining On Hold Amid External Uncertainties - DEC 2017


BMI View: The CBC ' s decision to maintain its discount rate at 1.375% during its monetary policy meeting on September 21 was in line with our expectations. With inflation remaining stable and growth facing external uncertainties, we maintain our forecast for the CBC to remain on hold at 1.375% throughout 2017. In addition, the central bank will seek to provide stability as Governor Perng is set to retire in 2018.

During its September 21 monetary policy meeting, the Central Bank of the Republic of China (Taiwan) (CBC) held its discount rate at 1.375%, which was in line with our expectations. In its monetary policy statement, the central bank adopted a cautious tone, noting that 'uncertainties over the global economic outlook still weigh on external demand... and economic growth, though projected to pick up at a moderate pace in the second half of this year and next year, would still run below potential'. It added that 'a policy rate hold is conducive to financial stability and economic recovery'.

With inflation remaining stable and growth facing uncertainties due to external circumstances, we expect the central bank to seek to remain supportive of growth. Furthermore, with long-serving central bank governor Perng Fai-nan set to step down in 2018 and his successor having yet to be appointed, we believe that the CBC will seek to provide stability ahead of the transition and we maintain our forecast for the central bank to remain on hold at 1.375% throughout 2017.

Source: BMI, Bloomberg

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