Hike rates

Taiwan c.bank raises GDP forecast, may raise rates in 2022

  • The benchmark discount rate remains unchanged at 1.125% as expected
  • Taiwan central bank raises 2021 growth forecast to 6.03%
  • The central bank forecasts growth of 4.03% in 2022
  • Governor says watching rate hikes in major economies
  • Governor says rate could rise to 1.375%

TAIPEI, Dec 16 (Reuters) – Taiwan’s central bank on Thursday upgraded the island’s growth outlook for 2021 as strong exports buoyed its trade-dependent economy which has boomed on tech demand , and said it would likely tighten policy next year by raising rates.

Companies in Taiwan, home to major chip companies such as Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (2330.TW), also benefited from demand for laptops and tablets to support the work and study trend. at home during the pandemic. such as a worldwide shortage of microchips.

The central bank raised its estimate of gross domestic product (GDP) growth for 2021 to 6.03% from 5.75% forecast in September, and kept the benchmark discount rate (TWINTR=ECI) at a record high of 1.125%, as predicted by the 25 economists in a Reuters poll.

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Bank Governor Yang Chin-long told reporters the economy was not overheating, inflation was within a controllable range, and they were paying attention to major rate hike decisions. savings.

The rate cut last year was intended to help small Taiwanese businesses, and their progress would help signal the future direction of rates, he added.

“If their recovery goes well, then this is a good opportunity to pull it up,” Yang said, adding that it could theoretically get back to where it was before it was cut in March last year to 1.375%. .

Asked about the likelihood of a rate hike next year, Yang said “there is a possibility.”

The bank “will definitely head for tightening,” he added.

Taiwan’s move to keep rates on fire comes after the US Federal Reserve announced on Wednesday it would end its pandemic-era bond purchases in March and pave the way for rate hikes. three-quarters of a percentage point interest rate by the end of 2022. read more

Kevin Wang, an economist at Taishin Securities Investment Advisory Co, said any rate hikes next year would likely only come after the Fed took action first.

“I think Taiwan’s central bank is more likely to raise the rate in the second half, and maybe do it twice,” he said.

Taiwan was one of the few Asian economies to grow in the pandemic-hit 2020, growing 3.11% that year – faster than China – after growing 2.71% in 2019.

GDP grew in the third quarter of 2021 by 3.7% compared to the previous year period, compared to 7.43% in the second quarter, pulled down by a partial lockdown to prevent the spread of national infections in the COVID-19, but policymakers predicted 6% or more growth for the full year due to the surge in exports. Read more

For 2022, the bank said it saw GDP grow 4.03%, down from a previous forecast of 3.45%.

It has kept its policy rate unchanged at each quarterly meeting since its cut in March 2020.

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Reporting by Liang-sa Loh and Yimou Lee; Additional reporting by Emily Chan; Written by Ben Blanchard; Editing by Ana Nicolaci da Costa and Christian Schmollinger

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