December 18, 2017 / 6:39 AM / 8 months ago

Taiwan seen leaving rates unchanged for sixth straight quarter: Reuters poll

TAIPEI (Reuters) - Taiwan’s central bank is expected to leave its policy rate steady for the sixth straight quarter on Thursday, as exports prove a bright spot for the economy and inflation remains mild.

The central bank is expected to leave the discount rate at 1.375 percent at its board meeting, according to all 16 analysts polled by Reuters. It had cut the rate four times in a row from late 2015 to help lift the trade-reliant economy out of a mild recession.

Asia’s major manufacturing economies such as Taiwan have benefited from strong global growth and robust demand for electronics. The cycle of rising U.S. interest rates also points to tighter monetary policy in the region as central banks guard against capital outflows.

Taiwan’s stronger-than-expected exports and recovering private consumption have helped drive economic momentum in recent months, but there remains pockets of weakness in the domestic economy and labor market that will likely cap price growth.

Some analysts noted that current economic conditions were not yet ripe for the central bank to raise rates, and a move may only come in the second half of next year.

“Even though international oil prices have recently risen, Taiwan’s inflation rate is still quite low,” said Carl Liu, an analyst at KGI Investment Advisory.

“Other than this, Taiwan’s central bank places considerable importance on the economic growth rate, and it was only until the second half of this year that the economic growth rate saw optimistic numbers. But under these current conditions it is difficult for the central bank to raise rates,” Liu said.

“KGI Investment Advisory forecasts that the central bank will increase rates at the earliest in the third quarter of next year. However, we also forecast the economic recovery will go on until the second quarter of next year.”

The central bank said in minutes from its September meeting the outlook for Taiwan’s exports was expected to be supported by a steady global recovery, strong semiconductor demand and the introduction of new hand-held mobile devices.

It added that inflation was expected to be mild amid rising pressure on the trade and economic fronts.

In November, the government nudged up its 2017 economic growth projection to 2.58 percent from 2.11 percent. It also raised its GDP forecast to 2.29 percent for 2018.

Consumer prices in November, as measured by the consumer price index (CPI), rose 0.35 percent from a year earlier compared with a decline of 0.32 percent in October.  

Poll compiled by Carol Lee; Additional reporting by Jeanny Kao; Writing by Jess Macy Yu; Editing by Jacqueline Wong

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