(Bloomberg) -- Taiwan’s central bank may keep monetary policy relatively tight for some time, with the minutes of its latest policy meeting showing a debate over the outlook for inflation and the heated housing market.
The board unanimously voted to keep borrowing costs at 2% at their June 13 policy meeting but one member initially called for a rate hike, and another said they would agree with an increase in borrowing costs, according to minutes of the meeting released on Friday. Both warned that rising property rents are increasingly fueling consumer price inflation.
The minutes indicated that others felt rates are at an appropriate level. Two argued that inflation concerns have eased and economic growth has been robust, while another cautioned that growth is not evenly distributed among different sectors, and that higher rates may increase the burden on non artificial intelligence-related industries.
The debate among policymakers shows the tensions within Taiwan’s economy. There is strong export demand thanks to its tech expertise, but cost-of-living issues, including high home prices, are squeezing incomes.
Last month, the monetary authority lifted its GDP growth forecast for this year to 3.77% from 3.22%, even though the central bank governor Yang Chin-long said at a briefing following the June meeting that growth in the second half of 2024 would be slower than in the year through June.
But with a slightly negative output gap in 2024 and with inflation gradually easing, Barclays Plc’s regional economist Bum Ki Son said a rate hike is unlikely.
“Our baseline view is that the rate cut will be as early as March 2025, but with a risk of delay,” Son said.
While keeping the key rate unchanged, the central bank last month raised its reserve requirement rate and tighten curbs on buying property, with the clear aim of tightening liquidity and cooling the housing market. According to the island’s interior ministry, the housing price index in the first quarter of 2024 grew 9.3% compared to the same period last year, the fastest pace since the third quarter of 2022.
The minutes show the central bank doesn’t want to hurt the economy with an outright rate hike, but does want to tighten liquidity in the property sector in particular, Son said.
--With assistance from Hailey Wang, Chien-Hua Wan and Betty Hou.
©2024 Bloomberg L.P.
