Taiwan’s central bank to put aside its rate hike plans

Societe Generale notes..

• We expect Taiwan's central bank to put aside its rate hike plans and leave the policy rates unchanged at its Q1 meeting, given that inflation is expected to moderate this year and the global easing wave coming from its neighbours.
  
  
• After CBC's previous meeting in Q4 last year, activity data posted a mixed picture: exports came in with soft prints, with decreasing demand from China and the euro area dragging down headlines despite the boost from the US.
  
  
• Industrial production continued to expand at relatively high paces (around 8% yoy).
  
  
• Retail sales have seen choppy growth, but in our view this was mainly attributed to temporary distortion and the underlying strength persists thanks to a tighter labour market.
  
  
• Meanwhile, inflation numbers undershot expectations. That said, headline inflation ratesturning negative was mainly due to the plunge in crude oil prices and improved food supplyand these drags could be temporary.
  
  
• There is only limited softness in the core inflation due to a slightly stronger currency (TWD) in trade-weighted terms. 
  
  
• Nevertheless, the disinflationary environment in the near term and the increasing global monetary easing since last year, especially that from its neighbours Korea, Japan and China, will probably make the central bank on hold throughout 2015.