Central Bank On Hold At Record Low

Taiwan dollar is weaker in early trade, USD/TWD last up 0.023 at 27.785. Yesterday the CBC unanimously decided to keep rates on hold at a record low 1.125%, TWD recorded its biggest one day loss in a month as the greenback rallied.

• The bank cited the recovering global economy, accommodative policy from central banks globally, a subdued inflation outlook (overlooking recent strength) and robust domestic growth despite risks from coronavirus outbreaks. The bank also revised up growth and inflation forecasts to 5.08% and 1.60%, respectively.
• Goldman Sachs says: "The CBC presented its monetary policy framework in a report today and reiterated the importance of maintaining economic, financial stability and currency exchange rate stability. The report mentioned "for a small open economy, the ideal monetary policy framework should have flexibility in defining price stability and fully take into consideration exchange rate impact on economic activity." While currency stability is one of CBC's mandates, the report emphasized "the CBC does not necessarily need to target levels of the currency exchange rate, but needs to consider exchange rate stability in monetary policy operations. Regarding potential economic impact of future rate hikes on corporate activity, the governor mentioned that rate hikes may not affect economic activities materially given that levels of interest rates are currently very low."
• Elsewhere, local media reports that Taiwan is to receive 240k Moderna COVID-19 vaccines today, and is set to receive further vaccines from the US in the coming weeks. Taiwan reported 175 new cases on Thursday.