Taiwan central bank to use 'appropriate' monetary tools to deal with virus

TAIPEI (Reuters) - Taiwan’s central bank will use “appropriate” monetary policy tools and hold board meetings as needed to deal with the economic impact of the coronavirus, it said in a report to be presented next week to parliament and issued on Saturday.

Taiwan’s central bank cut interest rates for the first time in more than four years last week to a new low and reduced its growth forecast for the export-oriented economy amid growing fears that the coronavirus could trigger a global recession.

It also said it would expand the scope of repurchase facility operations and provide banks with T$200 billion ($6.6 billion) of financing to support small- and medium-sized companies which have been hard hit by the virus’s impact.

“The bank will continue to pay attention to the development of the pneumonia epidemic, the trend of monetary policy in major economies and its impact on domestic and foreign economic and financial affairs,” it said in its report, issued ahead of the central bank’s governor appearing before parliament on Monday.

“If necessary, the bank will convene a meeting of its board or an interim meeting to appropriately use monetary policy tools to meet its statutory duties,” it added, without giving details.

“In order to fully provide the liquidity required by the financial markets, in an emergency the bank can expand repo operations.”

The bank holds quarterly rate-setting meetings, but has said it will hold other meetings as needed to make policy decisions to respond to the virus’s impact on the economy.

While the virus has caused turmoil on international markets, Taiwan’s stock and foreign currency markets have performed “relatively stably”, it added.

Taiwan stocks .TWII have the advantage of having good dividend yields, and are attractive to investors who want to buy on dips, the bank said.

Taiwan, which has reported 283 cases of the virus, has won plaudits for keeping its numbers low, due to taking early action to limit its spread and a strong health-care system.

The government is also rolling out a T$60 billion stimulus package to support the economy, and has said it will spend more as needed.

Reporting by Liang-sa Loh and Ben Blanchard; Editing by Stephen Coates