Taiwan’s central bank cuts rates for fourth time to revive economy

By J.R. Wu and Jeanny Kao

TAIPEI (Reuters) – Taiwan trimmed its benchmark interest rate for the fourth consecutive meeting on Thursday, to shore up flagging growth as downside pressures rise for the trade-dependent economy.

The widely expected easing comes a week after Britain voted to leave the European Union, setting off unprecedented market volatility and clouding global growth prospects.

Taiwan’s trade-reliant economy has been hit by falling exports and the added uncertainty of Brexit, and how the fallout trickles down to end demand for tech goods, could deepen the woes of its manufacturers.

The 0.125-percentage-point cut lowers the discount rate to 1.375 percent, a level last seen in mid-2010.

The median forecast in a Reuters poll was for the discount rate to be cut by 0.125 percentage point.

Thursday’s cut extends an easing cycle begun in late September, and analysts say the central bank could lower the rate further this year to support the economy.

“Considering the increase in uncertainties from the recent international environment, the outlook for the domestic economy is increasingly conservative,” the central bank said.

Earlier, the central bank said the direct negative impact on the economy from Brexit was limited due to Taiwan’s relatively smaller exposure to the UK. Authorities have said they will act to stabilise domestic financial markets if needed.

Taiwan’s exports, which drive economic growth, are likely to contract for the second straight year in 2016 and annual economic growth could fall short of the 1.06 percent forecast by the government.

The concern is that trade disruptions from Brexit would deepen the problems tech manufacturers already face from China’s slowdown and weaker demand for Apple Inc’s iPhones.

“The political shocks and uncertainties of Brexit, if it affects investment and consumption, could result in adverse impacts on the global economy,” Chen Tain-jy, minister of the National Development Council, Taiwan’s long-term planner, told reporters following a cabinet meeting this week.

(Editing by Jacqueline Wong)



Categories: Asia Unhedged, China

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