TAIPEI — Taiwan’s central bank’s “flexible” monetary policy structure during a period of high uncertainty can help maintain price and financial stability as well as economic growth, its governor Yang Chin-long said on Tuesday.
The central bank has raised its benchmark interest rate three times already this year, and will hold its next quarterly rate-setting meeting on Dec. 15.
At the last meeting in September, the bank raised it by 12.5 basis points to 1.625%.
It has repeatedly said it will tighten monetary policy this year, in line with counterparts elsewhere, but that inflation will be a key decider. The consumer price index, or CPI, rose an on-year 2.72% in October, the third month in a row is has been below 3%.
Speaking at an academic forum, Yang said Taiwan’s rate of tightening had been relatively mild compared with the United States and other major economies.
Though the current inflation “shock” is mainly driven by supply-side costs, the central bank must still adopt a tightening monetary policy to restrict inflation expectations in order to maintain price stability, he added.
But the central bank’s flexible monetary policy structure “in an era of high uncertainty” can help the bank achieve its statutory goals of price stability, financial stability and economic growth, Yang added.
While Taiwan’s export-dependent economy grew a much faster than expected 4.1% in the third quarter, according to a preliminary reading, trade numbers have been wilting.
Taiwan’s export orders contracted more severely than expected in October on weak consumer demand hit by global inflation and interest rate hike woes.
The central bank will also give its revised forecast for 2022 economic growth on Dec. 15. In September, it predicted a 3.51% expansion, down from a previous prediction of 3.75%. (Reporting by Liang-sa Loh; Writing by Ben Blanchard; Editing by Stephen Coates)