Taiwan central bank seen leaving rates unchanged amid trade war worries

TAIWAN - TAIPEI. Taiwan's central bank is expected to leave its policy rate unchanged at its meeting on Thursday, a Reuters poll showed, amid renewed worries that an escalating U.S.-China trade war will hurt the island's trade-reliant economy.

All 15 economists polled said they expected the central bank to keep the benchmark discount rate at 1.375%, the 12th consecutive meeting in which it has held rates unchanged.

Taiwan's economic growth has slowed, hurt by shrinking global tech demand and the bruising tariff war between its two largest trading partners. The island's exports contracted for a seventh straight month in May due to slowing demand for its technology exports.

While major central banks around the world are moving to an easing bias and some have cut rates to support their economies, some economists say monetary conditions in Taiwan are already accommodative due to a slide in bond yields and a drop in the local dollar.

DBS economist Ma Tieying said in a note that Taiwan's real interest rates are already at a low level, leaving the central bank little room for further monetary easing.

She said substantial government policy changes could be delayed to next year given Taiwan's coming presidential and parliamentary elections in January.

Higher interest rates could also lift the Taiwan dollar, hurting the island's export competitiveness. The Taiwan dollar has fallen 2.5% against the U.S. dollar so far this year.

The government last month lowered its 2019 economic growth forecast again to 2.19% and also cut its estimate for full-year exports to a contraction of 1.17% from slight growth previously, citing a slowing global economy.