9月 Meeting Delivers 10th Hold, Two Directors Dissent
The central bank's September 17 board meeting decided to leave the policy rate unchanged, marking the 10th consecutive freeze. Governor 楊金龍 previously said that although the rate was not adjusted, funds have been managed through open market operations and the overall monetary policy stance has tightened. According to the minutes summary released by the central bank, 2 directors voted against the decision and called for raising the policy rate: 台灣大學 economics distinguished professor 陳旭昇, and Academia Sinica academician and 台灣大學 economics professor 李怡庭.
Hawks Call for Correcting Low Rates, Keeping Policy Neutral
Directors favoring a hike argued that now is a good time to normalize monetary policy. The director stressed that a hike is not meant to curb cyclical fluctuations nor to fight inflation, but to correct excessively low interest rates, maintain a neutral monetary policy stance, support economic stability, and help Taiwan exit the low-rate trap. Taiwan's current economic growth is very strong, but inflation risks remain, and 1-year time deposit real rates for this year and next year remain negative, suggesting monetary policy may be slightly too loose.
Warning on Inflation Inequality and PPI Pass-Through Risks
The director also flagged inflation inequality, noting that low-income households spend mostly on necessities and cannot easily cope with price increases by cutting purchases or switching products, so they bear a relatively heavy inflation burden, which is also a reason to advance monetary policy normalization. Another director favoring a hike worried about future inflation pressure, mainly because in recent months the domestic PPI for 國產 domestic sales has risen year-on-year and may pass through to CPI in the future, while import prices have also continued to climb.
Focus on Taiwan-US Rate Gap and Lending Concentrated in ICT
The director noted that the US Federal Reserve raised rates by 1碼 in September, and if Taiwan holds rates unchanged, the widening Taiwan-US rate gap will 大將 add renewed depreciation pressure on the New Taiwan dollar, further increasing import price pressures. In addition, bank lending has continued to increase recently and is concentrated in the ICT industry, and strong funding demand has pushed long- and short-term rates higher, so the central bank could raise the policy rate to move closer to market rates, cool aggregate demand expansion, and ease inflation pressure.
Hold Camp: Rate Already Highest Since 2009年
However, directors favoring a hold argued that over the long term Taiwan has kept inflation well controlled with continued economic growth, the policy rate is positive in real terms and its current level is already the highest since 2009年, so there is no low-rate trap and no monetary policy normalization problem. Whether a country's policy rate is too low should depend on whether inflation is well controlled, not only on the nominal rate level or whether the real rate is negative. Another director noted that monetary policy transmission works with a lag, effects take time to appear, and domestic and foreign institutions all forecast inflation will gradually decline, so rates can remain unchanged. Some directors also warned that if the US-Iran conflict lasts too long, room for government measures to provide support may gradually shrink, so price trends should be watched closely; several other directors were concerned that a hike could worsen uneven funding allocation across industries, putting greater pressure on traditional industries and small and micro enterprises.