Taiwan’s central bank will hold its next quarterly interest rate policy meeting on March 26. Taiwan’s central bank has left its interest rates unchanged at 1.875% for 14 consecutive quarters. But investors are wondering if the central bank will finally adjust its rates following South Korea’s interest rate cuts on Thursday.
As Taiwan’s economic growth is driven by exports, its benchmark rate is widely expected to remain steady until the U.S. Federal Reserve raises its rates. But on Thursday, South Korea’s central bank cut its base rate to a record low of 1.75%. Governor of Taiwan’s central bank, Perng Fai-nan, said Thursday that South Korea’s interest rate cut was implemented so that their exporters can compete with Japanese competitors.
“South Korea and Japan export similar products. Since Japan started its Quantitative Easing measures, the depreciation of the yen has been putting a lot of pressure on South Korean exporters," said Perng. "South Korea and Japan both export automobiles, but Taiwan doesn’t. We will do our best to raise our exporters’ competitiveness. But our interest rate is in fact already very low.”
Perng said that if the jobless rate in the U.S. drops below 5.2%, the Federal Reserve will also drop its promise to be “patient” before removing a barrier to raise short-term interest rates as early as June. But Perng said that although the US and Taiwan have close economic ties; Taiwan’s interest rate policy won’t necessarily follow the moves of the US central bank.
Perng’s comments implied that the interest rate will likely remain the same for another quarter. He said that the central bank’s interest rate policy will be made public after the meeting on March 26th.