Taipei, Sept. 21, 2012 (CENS)--In view of the inflationary pressure to be brought about by the third-round quantitative easing policy (QE3) of the U.S., the regular meeting of the board of the directors and supervisors of the Central Bank of China (CBC) resolved to maintain discount rate unchanged yesterday (Sept. 20). Meanwhile, thanks to the intervention of the CBC, the NT dollar depreciated sharply yesterday, reversing steep appreciation in midsession.
The CBC has kept the discount rate unchanged at 1.875% for five consecutive quarters. Perng Fai-nan, CBC governor, expressed that annual growth rate of consumer price index will be slightly lower than 2% and economic growth rate will be higher than 1% this year.
Caught in the dilemma between inflation and economic growth, the CBC chose to stick to the status quo. In coping with the onset of hot money, the CBC adheres to a moderately loosea monetary policy. It is adjusting market position via the issuance of negotiable certificates of deposits (NCD) and will take further action, in response to the situation of inflation and economic recovery.
The NT dollar appreciated NT$0.145 against the U.S. dollar in midsession but the CBC intervened heavily at the end of the trading session, inducing the NT dollar to depreciate NT$0.103 and close at US$1=NT$29.5 eventually. The scale of the fluctuation of the local currency reached NT$0.25.
Citing the forecast of the Directorate General of Budget, Accounting, and Statistics (DGBAS), Perng noted that Taiwan's economic growth rate in the second half will be higher than that in the first half. The domestic economy is continuing to grow, although at a slower pace. In the future, if the CBC resolves to adjust interest rate, inflation will be a major consideration.
