Taiwan holds rate steady, sees improved 2013 outlook

    Taiwan's central bank held its benchmark interest rates unchanged, as expected, saying the current policy rate was conducive to maintaining price stability and promoting economic growth in light of a modest economic recovery, subdued inflationary pressures and global economic uncertainties.
    But the Central Bank of the Republic of China, which has held its discount rate steady at 1.875 percent since June last year, struck an optimistic tone about next year, saying the domestic economy was forecast to expand by 3.15 percent in 2013 as exports and private investments are likely to revive on the back of a gradual economic recovery while consumption remains steady.
    "Recent developments point to signs of stabilization for the global economy, with an improved outlook for 2013," the bank said after a meeting of its board.
    The central bank said the Taiwan dollar's exchange rate was in principle determined by the market but when there is "excess volatility and disorderly movements" with adverse implications for economic and financial stability, "the CBC will step in to maintain an orderly market."

    Earlier this month the central bank intervened in the foreign exchange market to ease the upward pressure of the TWD, which has appreciated some 4.5 percent against the U.S. dollar this year.
    It said the euro zone recession has eased, the U.S. economy looks set for moderate expansion, China has regained growth momentum and Asian emerging economies also see a rebound in prospect.  However, the bank added there were still risks from the U.S. fiscal cliff and Europe's debt crises.
    The central bank's board set a M2 growth target of 2.5-6.5 percent for 2013.
    Taiwan's economy picked up speed in the third quarter, expanding by 0.98 percent from the second for annual growth of 1.13 percent, reversing a 0.18 percent contraction in the second.
    The central bank said the economy was estimated to have expanded by 2.97 percent in the fourth quarter from the third.
    Inflation, which fell to 1.59 percent in November from October's 2.36 percent, was estimated at 1.93 percent for 2012 and is forecast to fall to an annual rate of 1.27 percent next year due to expected steady international commodities and lower base effect for fruit and vegetables, the bank said.
    The central bank's market operations have been aimed at managing liquidity, it said, adding that banks' excess reserves were steady at $21.6 billion and for the first 11 months of the year loans and investments by banks grew by an annual rate of 5.03 percent and the M2 annual growth rate averaged 4.22 percent, sufficient to meet the economy's needs and support growth.

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