CBC likely to hold rates owing to benign inflation outlook, says Scotiabank

The Central Bank of the Republic of China (Taiwan) (CBC) is expected to leave its policy rate unchanged at 1.375 percent on Thursday after the United States Federal Reserve delivered a dovish rate hike last week, given the island’s benign inflation outlook, Scotiabank reported,

The island’s CPI inflation dropped to -0.04 percent y/y in February, from 2.25 percent the previous month. Further, the headline retail inflation is expected to rise slightly in the coming months. In addition, the auction yield on the 364-day NCD has slid gradually since last December.

Foreign investors poured total USD 1.47bn into local equity markets in the past four sessions post March FOMC meeting, boosting the TWD that has been running a tight correlation with local shares since early 2015. Year-to-date, global funds have added to their holdings in Taiwanese stocks by USD 4.43bn according to Bloomberg data.

Meanwhile, the TWSE share index is close to the 10,000 psychological resistance level, which may limit the downside potential for the USD/TWD pair for now on the technical side.