November 22, 2021
TAIPEI (Reuters) -Taiwan’s central bank is concerned that any interest rate hike now could lift the local currency, but will “definitely” follow the global tightening trend for next year, central bank governor Yang Chin-long said on Monday.
The benchmark rate is currently at 1.125%, the lowest on record, where it has sat since March of last year.
However minutes of the last board meeting in September showed that some members were worried about inflation and had recommended considering a rate rise.
Taking lawmaker questions in parliament, Yang expressed concern that any rate rise now would push up the Taiwan dollar.
“This is an area of worry for us,” he said. “So we need to watch the rate adjustment situation in other countries.”
However, the global trend for next year will to tighten policy, a direction Taiwan will “definitely” follow, Yang added.
The Taiwan dollar’s strength has vexed the government, not only because it makes exports crucial for economic growth more expensive but also as it raises the risk of being labelled a currency manipulator by the United States.
Taiwan was last formally labelled a currency manipulator by the United States in December 1992. It was put back on the monitoring list in 2020.
The central bank holds its next quarterly rate-setting meeting in mid-December.
Analysts say any rate rise would likely not come until the middle of next year, and only after the U.S. Federal Reserve has raised rates.
(Reporting by Liang-sa Loh; Writing by Ben BlanchardEditing by Shri Navaratnam)