By Liang-sa Loh and Sarah Wu
TAIPEI (Reuters) – Taiwan’s central bank raised its policy rate on Thursday for the fourth time this year but eased up on tightening, leaving banks’ reserve requirements unchanged, as it again cut its growth forecasts for this year and next on fears of a global slowdown.
The decision came after the U.S. Federal Reserve raised interest rates by an expected 50 basis points on Wednesday and said it would deliver more interest rate hikes next year even as the economy slips towards a possible recession.
Taiwan’s central bank, at its quarterly monetary policy meeting, raised the benchmark discount rate by 12.5 basis points to 1.75%, in line with economists’ expectations in a Reuters poll.
However, it announced no new rise in the various ratios it sets for banks’ reserve requirements, after increasing the rates at its previous two quarterly meetings.
Governor Yang Chin-long said that, while the bank was still tightening monetary policy, the direction this time was “mild” given the lack of another reserve requirement rise.
While inflation would ease next year, likely dropping below 2%, it remained a policy focus, Yang added.
“For next year’s monetary policy, we will focus on stabilising prices,” he told reporters.
Taiwan’s inflation, never as bad as in the United States or Europe, is already easing: The consumer price index was 2.35% higher in November than a year earlier, the lowest reading in nine months.
But the trade-dependent economy is loosing momentum as consumer demand swoons in major markets China, the United States and Europe. Taiwan’s exports last month slumped 13.1% year-on-year, far worse than forecast.
The central bank again cut its 2022 estimate for gross domestic product growth, to 2.91% from its previous forecast of 3.51% in September.
For 2023, it projected that GDP would grow 2.53%, compared with an earlier forecast of 2.9%. The economy grew 4.01% in the third quarter from a year earlier.
“Next year, the global economy will slow down and downside risks will continue to increase, affecting exports and investment momentum, and domestic economic growth is expected to cool down,” it said in a statement.
(Reporting by Liang-sa Loh and Sarah Wu; Additional reporting by Roger Tung and Emily Chan; Writing by Ben Blanchard; Editing by Edmund Klamann)
