Taiwan Rates Seen a Close Call This Week as IPhone Buoys Outlook

  • Just over half of economists surveyed see a hold at 1.375%
  • Those projecting a cut see prolonged period of flat growth

Economists are split over whether Taiwan’s central bank will add to its yearlong easing cycle at this week’s meeting, a Bloomberg survey shows.

The monetary policy board, led by Governor Perng Fai-nan, will hold the key interest rate at 1.375 percent Thursday, according to 14 out of 26 economists surveyed between Sept. 22 and Sept. 27. The other 12 forecast a reduction to 1.25 percent in what would be the fifth reduction since September last year.

Stronger-than-expected sales for Apple Inc.’s new iPhone 7 are supporting electronics companies while rising commodity prices benefit traditional industries like petrochemicals makers, Yen Chem-hui, a Taipei-based strategist at Yuanta-Polaris Research Institute, said in an interview. This quarter, there is “no need” for the central bank to help exporters by cutting the interest rate and depreciating the Taiwan dollar, Yen said.

Orders for August jumped 8.3 percent from a year earlier -- the first expansion in 17 months -- on rising demand for the components inside handheld devices as well as electrical machinery. Industrial production in the same month rose 7.74 percent, in part on electronics and also on rising oil prices.

On the other side of the split projection are those who see a more prolonged L-shaped recovery for the global economy. The effect of the iPhone may not last beyond one or two quarters, Ma Tieying, a Singapore-based economist at DBS Bank, said by phone. In the meantime with the U.S. holding off on raising rates, Taiwan can enact a cut without having to worry too much about capital outflows, Ma said.

The government in August revised its 2016 gross domestic product growth estimate to a 1.22 percent expansion, up from 1.06 percent. The growth forecast for 2017 was 1.88 percent.

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