Taiwan central bank says economy not overheating

Taiwan’s economy is not overheating and inflation is well under control, central bank governor Yang Chin-long said on Wednesday, as he responded to lawmakers’ questions about prospects for an interest rate rise.

The central bank cut the benchmark discount rate to 1.125 per cent in March last year, a historic low, as the Covid-19 pandemic began to bite, where it has remained ever since.

Taiwan’s economy has remained resilient throughout the pandemic, largely on demand for its tech exports like laptops and tablets to support the work and study from home trend that kept millions away from offices and schools around the world.

Yang, asked my lawmakers visiting the central bank when Taiwan might raise rates, said it depended on inflation.

“On monetary policy you need mainly to look at prices,” he said.

“So far, (the economy) won’t overheat,” Yang said, pointing to inflation of around 1.6 per cent to 1.7 per cent , compared with more than 3 per cent in the United States.

“For the United States to unwind, and raise interest rates, inflation must exceed 3% or 4%,” he added. “Of course, you can’t compare Taiwan with the United States. Our monetary policy, compared to the United States and other advanced countries, is not super loose.”