The central bank will hold its first meeting of the board of directors and supervisors this year (2023) on Thursday (23rd). Economists revealed that in the past 40 years, the central bank has never raised interest rates during a period of continuous export recession. With the four major uncertainties of finance, geopolitics and the market, it is expected that Taiwan’s central bank will decouple from the US Federal Reserve’s interest rate decision this quarter, announcing a “frozen increase” in interest rates, ending the four consecutive rises.
The U.S. Federal Reserve’s interest rate decision will be released in the early morning of the 23rd Taipei time. Chief economists in the financial industry also have different views on whether the Taiwan and U.S. central banks may announce an interest rate hike on the same day.
Li Zhenyu, Chief Economist of Taishin Financial Holdings, and Lin Qichao, Chief Economist of Cathay United Bank, both predicted in interviews that the Federal Reserve will announce an interest rate hike at this FOMC meeting. Li Zhenyu judged that Taiwan’s central bank will still raise interest rates by half a yard.
According to Li Zhenyu’s analysis, Taiwan’s inflation rate fell to 2.43% in February, mainly reflecting fluctuations in food and oil prices. In contrast, the core inflation rate is still 2.55%, and it presents a relatively rigid situation, reflecting Taiwan’s strong domestic demand and lack of work. Rising costs such as electricity and electricity prices continue to push up service prices, and the central bank still has room to raise interest rates.
Lin Qichao said that Yang Jinlong, the governor of the central bank, mentioned in the Legislative Yuan that the inflation rate will continue to be revised down this year, and there is still room for downward revision of economic growth. In addition, the problems of Silicon Valley Bank and Credit Suisse have caused international financial risks to heat up. According to the three major project observations, the central bank will suspend interest rate hikes this quarter.
Economists pointed out that if the central bank makes a decision to raise interest rates in March, it will set a new record in more than 40 years. “Compared with the same period of the previous year, exports in February have declined for six consecutive months, and the central bank still raises interest rates, which represents the inflation situation. Too severe, forced to follow up with the Federal Reserve to raise interest rates and suppress inflation expectations.”
Scholars said that the continuous decline in exports and the blue light of the economic climate indicate “uncertainty in the economic climate”. Silicon Valley Bank and Credit Suisse have successively exploded, which is “financial uncertainty”. Chinese President Xi Jinping will meet with Russian President Vladimir Putin And the Ukrainian-Russian War is “geopolitical uncertainty”, and the global stock and bond exchange, bitcoin, gold and crude oil prices fluctuate violently, which is “market uncertainty”. These four uncertainties will become the central bank of Taiwan and the Federal Reserve The key to decoupling the interest rate decision of the Federal Reserve this quarter is to announce a freeze in interest rates.
According to Li Zhenyu, in addition to the central bank’s interest rate decision, Yang Jinlong’s post-meeting statement must pay close attention to the trend of the core inflation rate, especially the recent increase in electricity prices, the degree of impact on subsequent inflation, and the successive outbreaks of bank credit in the United States and Europe. Crisis, impact on Taiwan’s financial system.
A senior bond company executive said, “I have been trading in the bond market for 30 years, and I have never seen the central bank raise interest rates when the economic light is on “blue”. Let’s see if the central bank will break my three views before retirement.”
