Taiwan cuts rate for third straight quarter

taipei — Taiwan cut its benchmark rate for a third consecutive quarter as an export slump showed no signs of recovering and has begun weighing on the labour market.

The central bank lowered the benchmark discount rate by another 12.5 basis points to 1.5 per cent, it said in a statement on Thursday in Taipei. Twenty-five of 26 economists surveyed by Bloomberg had forecast a cut, with 22 expecting the rate to reach 1.5 per cent, three predicting 1.375 per cent and one expecting no change.

The inflation outlook is steady and the domestic outlook is poised to improve, albeit at a slow pace, the central bank said in the statement. Overseas inflows have been strong amid low rates abroad, and policy makers will maintain foreign-exchange market order in the event of excessive volatility, according to the statement. Taiwan also will ease rules on mortgages.

Taiwan’s economy is headed for a third consecutive quarter of contraction as shipments shrank in the past 13 months amid a slowdown in China. The strongest stock inflows in Asia this year are buoying the local dollar, threatening to put the island’s exporters at a disadvantage to rivals in South Korea. The weaker trade picture is weighing on the labour market, raising the risk that consumption will cool further.

“The effects of rate cuts are becoming less and less obvious, but it still needs to be done,” Woods Chen, an economist at Ta Chong Bank in Taipei, said.