Taiwan c.bank debated larger rate hike, minutes show

TAIPEI, Jan 19 (Reuters) - Taiwan's central bank debated a larger interest rate hike at its last board meeting in December, with one board member saying the bank had been too optimistic about inflation forecasts, minutes of the meeting showed on Thursday.

The central bank, at its quarterly meeting in December, raised its policy rate (TWINTR=ECI) by 12.5 basis points (bps) to 1.75% and signalled an end to rate hikes in 2023 given inflation is coming under control. read more

But three of the 15 board members voted against that proposal, the minutes showed.

One board member, whom it did not identify, said slow rate hikes like the one approved at the meeting will not bring about "meaningful results in containing inflation", the minutes said.

"Several previous inflation forecasts by the bank seemed to err on the optimistic side, which might need to be revisited," it cited the board member as saying.

Another board member said the rise should have been 25 bps points to show a "committed effort" to rein in inflation, the minutes showed.

A third board member said the reason for Taiwan's mild inflation compared to the United States and Europe was because of the "huge losses" state-run power firms were absorbing to avoid passing on price rises to consumers.

Bank Governor Yang Chin-long forecast at the December meeting that inflation in 2023 would drop back to below 2%.

Taiwan's December consumer price index rose 2.71% year-on-year, slightly exceeding market expectations for a 2.5% rise.

With the economy now slowing sharply, the central bank will have to consider at its next scheduled quarterly meeting in March whether to stand pat, or even to start cutting rates.

Taiwan's trade-dependent economy unexpectedly contracted in the fourth quarter, putting in its worst performance in 13 years, hit by a drop in exports on slowing global tech demand and COVID-related chaos in its largest market China.

Reporting by Liang-sa Loh and Ben Blanchard; Editing by Kim Coghill

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