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With economy strong, Taiwan central bank likely to stand pat again on rates: Reuters poll By Reuters


© Reuters. FILEPHOTO: Staff member standing beside Taiwanese Central Bank logo, Taipei. Taiwan 26 February 2018. REUTERS/Tyrone Siu

TAIPEI (Reuters) – Taiwan’s central bank will likely keep its policy rate at a record low this week as the economy benefits from global demand for technology thanks to the work-from-home trend and a well-controlled COVID-19 situation at home, a Reuters poll showed.

All 25 economists polled said that the central bank would keep its benchmark discount rate unchanged at 1.125% for its fourth quarter meeting. This follows five consecutive meetings where it had been under fire. The rate was last reduced in March 2020.

The export-dependent economy of Taiwan has been supported in part by the growing demand for technology products by the increasing number people who work and study from home. This has also been helped by the worldwide economic recovery, as countries like the United States emerge from lockdown.

The economy grew 7.43% in the second quarter compared to a year ago, slower than 8.92% growth, but better than most of its regional counterparts.

Only a few daily COVID infection cases have been reported in the country. In July, there were restrictions placed on private gatherings, dining in restaurants, and entertainment venues. Consumption has started to recover.

Tony Phoo (OTC:), Standard Chartered’s Taipei-based economist, stated that Taiwan’s domestic market is improving slowly. He also said that externally support for semiconductors continues to flow.

But he warned of the uncertainty ahead. He cited fears that China’s economic growth will slow in fourth quarter, and whether the Biden government will be able increase the federal government’s borrowing limit or pass its $3.5 billion social spending legislation.

Taiwan Semiconductor Manufacturing Co Ltd., the biggest contract chip producer in the world (TSMC), is a critical part of the global supply chain that technology giants like Apple Inc. (NASDAQ).

The spread of the Delta variant to key markets, such as China and the United States, is a concern for Taiwan’s export-dependent economy.

On Thursday, the central bank will release its revised economic growth forecast. It had predicted an increase of 5.08% at its June quarterly meeting, and exports performed well.

(Poll compiled by Carol Lee; Reporting by Liang-sa Loh and Ben Blanchard; Editing by Ana Nicolaci da Costa)

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