- 11 of 24 economists in a Bloomberg survey predicted rate cut
- Decision follows declines in exports and industrial output
Taiwan’s dollar forwards slid to a six-year low as the central bank cut interest rates for the first time since 2009.
The benchmark rate was lowered to 1.75 percent from 1.875 percent, a decision forecast by 11 of 24 economists surveyed by Bloomberg. The move comes amid an economic slump, with data late on Wednesday having showed industrial production dropped for a fourth month in August. Exports fell in each of the last seven months and gross domestic product rose 0.5 percent in the second quarter, the least in three years. The growth rate for the third quarter will be lower and inflation is subdued, central bank Governor Perng Fai-nan said at a press briefing after the rate decision was announced.
The dovish tone of the central bank indicates a high chance for further cuts, said Claire Huang, a Hong Kong-based economist at Societe Generale SA. The weak outlook on Taiwan’s growth and inflation suggests another reduction in borrowing costs is likely in December, said Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia.
One-month non-deliverable forwards on Taiwan’s dollar declined as much as 1.3 percent to NT$33.368 versus the greenback, the weakest level since April 2009, data compiled by Bloomberg show. The spot rate, which dropped 1.8 percent in the last three days, closed little changed at NT$33.26 in Taipei on Thursday before the rate decision was announced.
A preliminary private gauge of Chinese manufacturing for September sank to the lowest level since March 2009 on Wednesday, triggering concern of a worsening slowdown in the world’s second-largest economy. China is the top destination for Taiwan’s exporters, who have had a rough ride in 2015 as they grapple with weaker demand and a downturn in the electronics sector.
The island’s industrial production slumped 5.5 percent from a year earlier in August, more than the 2.9 percent decline forecast in a Bloomberg survey.
— With assistance by Justina Lee, and Jimmy Zhu