TAIPEI (Reuters) – Taiwan’s central bank is expected to keep its policy interest rate unchanged this week and to stay the course until late next year as it deals with lingering inflation concerns, according to economists in a Reuters poll.
The central bank left the benchmark discount rate at 2% as expected at its last quarterly meeting in June, having hiked it to that level from 1.875% at the prior meeting in March ahead of a rise in electricity prices.
At its next quarterly meeting on Thursday it is again expected to keep the rate steady, according to all of the 32 economists surveyed.
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%.
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% – but the central bank has made bringing it down a priority and considers 2% 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. Federal Reserve which is expected this week to make at least a quarter-point reduction.
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% versus a previous +3.94% 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)
