CBC On Hold, Upgrades Forecasts

Taiwan dollar has weakened on Friday as the greenback rises, the rate moving further above the 28.00 handle.

• The Taiwan central bank kept the key policy rates unchanged at its quarterly monetary policy meeting yesterday, in line with consensus expectations. The bank noted recent strength in export sector activity, led by tech-related demand. It was also optimistic on domestic demand noting it has been on a steady growth trend, with a stable labor market and steady growth in retail sales, along with solid domestic investment led by tech sector capex.
• Forecasts for 2021 real GDP growth forecast have been revised up to 4.53% from 3.68%, inflation forecasts were also upgraded to 1.07% from 0.92%. Overall, the central bank said it intends to maintain key policy rates at current level, effectively continuing the loose monetary policy stance.
• CBC Governor Yang suggested that the outlook on inflation and US rates are amongst the factors that could affect the Taiwan central bank's potential rate hike decisions going ahead, though he mentioned that it was unclear whether Taiwan will raise policy rates before the US.
• Addressing financial stability concerns, the central bank announced further credit control measures targeted at the property sector; the cap for corporate mortgage loans, mortgage loans for households' purchase of luxury properties or third-property and above, have all been raised.
• In response to concerns over the possibility of being labeled as "currency manipulator", the governor adduced trade conditions, especially during special situations like the US-China trade war and COVID-19 pandemic, the bank said it will keep a dialogue open with the US, but have stated previously that being labelled a manipulator would unlikely have a pronounced impact.
• Elsewhere, there are reports that the Taiwan government is considering options to gradually resume relations with China, the announcement was made by the Mainland Affairs Council citing a speech by minister Chiu Tai-san.