TAIPEI- 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 percent, 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 US Federal Reserve has raised rates.
Meanhwile, Taiwan’s export orders grew more slowly than expected in October due to supply problems in the tech sector, though the government said technology demand overall remained strong ahead of the year-end holiday shopping season and into next year.
Taiwan’s export orders, a bellwether of global technology demand, rose 14.6 percent from a year earlier to $59.1 billion in October, data from the Ministry of Economic Affairs showed on Monday.
While that was the 20th month of expansion, the pace was much slower than the median forecast for a rise of 22.8 percent in a Reuters poll.
The ministry said a “lack of raw materials for some products” dragged down orders, pointing to electronics goods, but added that consumer demand to support digital lifestyles remained solid, especially for things like 5G.
The ministry’s statistics director Huang Yu-ling said supply chain problems had impacted orders for goods like chips and notebooks.
The end of the year is traditionally busy for Taiwanese suppliers due to the Christmas and New Year holidays, followed by the Lunar New Year in February.
Taiwanese companies such as Foxconn and Taiwan Semiconductor Manufacturing Co Ltd (TSMC) are major suppliers to Apple Inc, Qualcomm Inc and other global tech firms.
Looking ahead, the ministry warned of uncertainty from continued interruptions to the global supply chain and from the COVID-19 pandemic.
However, stockpiling ahead of 2022’s Lunar New Year – the most important holiday in the Chinese-speaking world – and demand for 5G and other new technologies will help maintain steady growth for export orders, the ministry added.
In September, export orders jumped 25.7 percent from a year earlier to $62.9 billion.
The ministry said it expects export orders in November to rise between 2.1 percent and 4.7 percent from a year earlier.
Orders from the United States rose 0.5 percent in October from a year earlier, a far slower rate of expansion compared with the 29.3 percent logged in September, while orders from China were up 21.7 percent, versus a gain of 11.5 percent the previous month.
