CBC Keep Rates On Hold As Expected

CBC kept policy settings unchanged at today's meeting, maintaining the policy rate at 1.125%. The bank did revise up its growth forecasts to 2.58% (prev. 1.60%) citing stronger than expected external demand. Inflation forecasts were revised down slightly to -0.25% (prev. -0.20%).

• In a note Goldman Sachs wrote: "Regarding the US Treasury FX Report of December 16, the central bank governor emphasized that central bank interventions amid large cross-border capital flows are necessary for a small open economy like Taiwan and FX interventions are not intended to achieve "unfair competitive advantage" in international trade. The CBC had earlier reported in its semi-annual report to the Legislative Yuan in October that its net FX purchases in the first half of 2020 amounted to US$3.9bn, and had started to disclose month-end outstanding FX swap position since March 2020 (US$ 94.7bn in November vs. US$ 98.6bn in March). It had also mentioned FX market interventions in June, July, September and November this year to address volatility. The CBC plans to disclose FX intervention data for 2H 2020, in its semi-annual report to the Legislative Yuan in March next year."