Governor of Taiwan’s Central Bank, Perng Fai-nan says that Taiwan is prepared for any sudden changes in US interest rates.
Though the US Federal Reserve did not raise interest rates last week, the Federal Open Market Committee (FOMC) will meet again in October and December this year. A hike in US interest rates is still a possibility in the coming months.
At the legislature on Wednesday, Perng said that 13 of the 17 FOMC members believe interest rates will rise this year. Perng said he believes the rate will rise by 0.25 percentage points by the end of the year. "There will not be a press conference in October and November, only in December. If [the Fed] says it will hold a press conference in October, that is a signal," Perng said.
Perng said that Taiwan’s Central Bank is ready to deal with an outflow of funds to the US. "Foreign currency is about 59% [of our current reserves], but it won’t all leave. Even if half of it goes, we can still deal with the situation," he said. "If over 30% leaves, we can also deal with it. It’s not possible for all of it to go because some of these are long-term funds that will stay here." Perng said the Central Bank will be able to handle any sudden changes to interest rates.