Taiwan unlikely to change interest rates: ANZ
May 26, 2012, 12:16 am TWN
TAIPEI -- Australia and New Zealand Banking Group Ltd. (ANZ) said Friday that Taiwan's central bank is not expected to change its key interest rates at a quarterly policymaking meeting in June due to the slowing economic fundamentals at home and abroad.
In a weekly economic review, Raymond Yeung, a senior economist at ANZ Research, said the lingering debt problems in the eurozone have imposed a negative impact on the global economy.
Taiwan has felt the pinch of the impact from weakening global demand, witnessing its export orders, an indicator of shipments over the next one to three months, falling accordingly, Yeung said.
He said under such unfavorable economic circumstances, the local central bank is unlikely to raise its key interest rates at the policymaking meeting scheduled in June, a move which will keep liquidity ample and help deflect the impact of negative external factors.
In April, Taiwan's export orders fell 3.52 percent from the same month of last year and were also down 5.95 percent from March to US$36.09 billion, lower than the market had previously expected.
For the same period, export orders from China, which serves as the largest buyer of Taiwan, fell 7.8 percent from a year earlier, and posted their fifth consecutive monthly decline.
There have been concerns over inflationary pressure in Taiwan, as the government has hiked domestic fuel prices and has announced plans to raise electricity rates in June.
However, Yeung said as the government has decided to raise power rates in three stages instead of a one-time increase, the local inflationary pressure has been contained, which is expected to prompt the central bank to leave the interest rates unchanged in the June meeting.
Since the end of June of 2011, the central bank has kept its interest rates intact with the discount rate at 1.875 percent and the rate of accommodations with collateral at 2.25 percent and the rate of accommodations without collateral at 4.125 percent.
Yeung said future movement of the local interest rates will hinge on the development of the debt crisis in the eurozone and the strength of China's economy.
The economist said as China is loosening its liquidity to boost its economy, it is expected that the mainland economy will regain momentum in the second half of this year to offset the impact from the eurozone.