Taiwan Unlikely to Join Other Asian Central Banks in Easing Monetary Policy

(Bloomberg) -- Taiwan is seen as unlikely to join several neighboring countries in cutting borrowing costs even as the trade war pushes Asian economies into a new monetary-easing cycle.

Taiwan’s central bank is expected to keep its benchmark interest rate unchanged at 1.375% for a 12th straight meeting Thursday, despite the effect the ongoing dispute between U.S. and China, its two biggest trading partners, is having on exports. There’s little expectation of a change any time soon - economists see Taiwan’s policy makers as unlikely to move until the first quarter of 2021.

Taiwan’s central bank has shown itself to be one of the most change-averse in the region, leaving it with little room to maneuver now that falling exports are dragging down growth. Over the past 10 years, it has changed its key rate just nine times. Even as policy makers elsewhere in Asia raised rates in the wake of the Federal Reserve’s increases in 2017 and 2018, Taiwan missed the opportunity to give itself some wiggle room.

“Taiwan’s rates are already on the floor. They’re already very low,” said Lee Chen-shan, executive vice president at Mega International Commercial Bank. “Are Taiwan’s conditions really that different from last quarter or the quarter before,” she asked, adding that there is ample liquidity.

The Philippines and Indonesia are seen as on the brink of a new monetary-easing cycle while the Bank of Korea is facing increasing calls to join them. All three raised rates last year while Taiwan held fast.

Taiwan’s exports fell for seven straight months through May after President Donald Trump raised tariffs on $200 billion worth of Chinese goods in September 2018. The island’s growth is expected to slow to 2% this year, according to a survey of 34 economist in June. The central bank will released updated forecasts for growth at the meeting.

To contact the reporters on this story: Chinmei Sung in Taipei at csung4@bloomberg.net;Samson Ellis in Taipei at sellis29@bloomberg.net

To contact the editors responsible for this story: John Liu at jliu42@bloomberg.net, James Mayger

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