CBC Seen On Hold In 2024 By Some US Banks

US Banks update their views post yesterday's on hold CBC outcome. Morgan Stanley and J.P. Morgan see the CBC on hold in 2024 as the base case.

Morgan Stanley: "Our base case is that the CBC will stay on hold throughout 2024: Our view on the global tech cycle is constructive: it is likely to lift exports and manufacturing activities in Taiwan, and the effect should trickle down to domestic investments and labor market activity. With a solid buffer from external demand, we see only a moderate slowdown in consumption, which likely supports only an incremental pace of inflation cooling down towards year-end vs. the CBC's view of 2H24"

J.P. Morgan: "Looking ahead, the Taiwan central bank’s key policy focus includes: (1) major DM central banks’ monetary policy outlook; (2) downside risks for the Chinese economy; and (3) the global commodity price trend. While our US colleagues expect the Fed to cut rates by 125bp in 2024, we doubt the Taiwan central bank will rush to follow suit, not only because Taiwan’s rate increase has been rather modest, but also because real interest rates remain below the historical average level (we expect Taiwan’s headline CPI and core CPI inflation to average at 2.0%yoy and 1.9%yoy respectively in 2024). Indeed, central bank governor Yang was quoted by Bloomberg stating that Taiwan won’t necessarily follow the Fed in cutting rates, and will consider domestic economic conditions. Overall, we expect the Taiwan central bank to keep policy rates on hold in 2024."