Two members of Taiwan’s central bank board backed a rate hike — Taipei Times
In Taiwan, two members of the central bank’s board supported an interest rate increase, while the majority of meeting participants favored keeping it at its current level. This follows from the minutes of the bank’s meeting last month, the Taipei Times reports.
Board members expressed concern about rising inflation. They cited increasing import and producer prices as possible sources of further consumer price growth. At the same time, government measures to stabilize energy prices, they said, helped limit the impact of more expensive oil on consumers.
Arguments on the rate
One director called for the start of monetary policy normalization after a prolonged period of exceptionally low rates. He noted that a rate increase does not necessarily have to be aimed at curbing inflation or slowing economic activity, but could bring borrowing costs closer to a neutral level.
Separately, one director warned that keeping the rate unchanged while the US Federal Reserve raises its rate could widen the gap between the rates of the two economies. In his view, this could increase pressure on the New Taiwan dollar and raise import costs.
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Access to financing
Supporters of an unchanged rate pointed out that inflation in Taiwan is more moderate than in the United States, the eurozone, and South Korea, where price growth exceeded 3%. They also noted that since March 2024, the central bank has already tightened financial conditions without changing the benchmark rate, through higher reserve requirements, stricter real estate lending rules, and open market operations.
Some directors believe that higher rates could deepen inequality in access to credit. Technology-sector companies benefiting from artificial intelligence-related demand are less sensitive to borrowing costs than traditional manufacturers. Against a backdrop of already limited liquidity, rate hikes could make it more difficult for small and medium-sized enterprises, microbusinesses, and traditional manufacturers to raise funds.
The directors also noted an uneven recovery in domestic demand: despite strong export growth, private consumption remains relatively weak. All board members agreed that monetary policy decisions should take into account inflation trends, domestic financial conditions, and the actions of leading foreign central banks.
Separately, one director called for close monitoring of the growth in bank lending to securities companies amid active stock trading. He warned that a sharp stock market correction could increase risks for lenders.
