“Taiwan Holds Rates Amid Inflation”, The central bank left the benchmark discount rate at 2 per cent as expected at its last quarterly meeting in June, having hiked it to that level from 1.875 per cent at the prior meeting in March ahead of a rise in electricity prices.
Economists who answered questions on the outlook beyond this week predicted the bank would start cutting rates only from the third quarter of 2025, with the median estimate a drop to 1.875 per cent.
Taiwan’s inflation has never been as high as in major Western economies – the consumer price index (CPI) in August rose by a higher-than-forecast 2.36 per cent – but the central bank has made bringing it down a priority and considers 2 per cent its “warning” line.
Hsu Chih-yen of MasterLink Securities said that given Taiwan’s inflation, standing pat was the most likely outcome.
“The central bank will not be following the Fed,” Hsu said, referring to the U.S.
Last week, the European Central Bank cut interest rates again and signalled a “declining path” for borrowing costs in the months ahead as inflation slows and economic growth in the euro zone falters.
Taiwan’s tech-centred, export-dependent economy has been thriving on demand from the artificial intelligence (AI) boom that has driven orders for the likes of TSMC, the world’s largest contract chipmaker.
But last month Taiwan’s statistics bureau trimmed its economic growth prediction for this year to 3.9 per cent versus a previous +3.94 per cent on weaker projected exports, and noted some uncertainty in AI demand.
The central bank will announce its own revised economic growth and inflation forecasts for this year and give its first predictions for next year on Thursday.
(Poll complied by Susobhan Sarkar and Anant Chandak; Reporting by Ben Blanchard; Additional reporting by Roger Tung and Liang-sa Loh; Editing by Stephen Coates)
