TAIPEI, July 30 (Reuters) - Taiwan central bank policymakers are planning to save space for further interest rate cuts should there be a sharper economic downturn because of the coronavirus pandemic, minutes of their June meeting showed on Thursday.
The policymakers did not think they needed to follow some counterparts and lower interest rates at their June meeting, citing a possible gradual recovery in Taiwan’s economy in the second half, the minutes show.
The central bank unexpectedly left its policy rate unchanged in June but further reduced its growth forecast for 2020, as the pandemic threatens to deal a further blow to the trade-reliant economy.
Several board members said the bank should “save space” for possible policy rate adjustments in the future because of economic uncertainty from the pandemic.
“It’s highly uncertain whether there would be a second wave of virus outbreak globally, so it’s better to save some room for the (rate) policy,” one board member said.
Another board member said the bank should consider adjusting rate policy only if a stronger Taiwan dollar affects the island’s exports competitiveness.
One member, however, said saving room for further rate cuts should not be a factor in the decision to hold the policy rate, and that the bank should consider using other policy tools if there’s a sharper economic downturn.
Taiwan, a key part of the global technology supply chain, has avoided the lockdowns seen in other parts of the world and its economy has performed better compared to many countries in Asia, as early measures prevented a rapid spread of COVID-19.
Some analysts have turned more bullish on Taiwan’s growth outlook, citing stronger-than-expected technology exports and effective virus-containment measures, which they say will boost domestic demand in the future.
Economic growth is likely to slow to a five-year low this year of 1.67%, the government said in May, from 2.71% in 2019. (Reporting By Liand-sa Loh and Yimou Lee; Editing by Christian Schmollinger)
Our Standards: The Thomson Reuters Trust Principles.