Taiwan Central Bank Expected to Hold Interest Rates Steady Amid Inflation Concerns
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Taiwan set to hold rates steady on inflation worries
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)
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Taiwan set to hold rates steady on inflation worries: Reuters poll
TAIPEI, Sept 16 (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 (TWINTR=ECI), opens new tab 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. Advertisement · Scroll to continue 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. Advertisement · Scroll to continue 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 (2330.TW), opens new tab, 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 Our Standards: The Thomson Reuters Trust Principles., opens new tab
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Taiwan's central bank is anticipated to maintain its policy rate at 1.875% in its upcoming meeting, as policymakers balance economic growth with persistent inflation worries.
Economic Outlook and Rate Decision
Taiwan's central bank is expected to keep its benchmark interest rate unchanged at 1.875% in its upcoming quarterly meeting on Thursday, according to economists surveyed by Reuters. This decision comes as policymakers navigate a complex economic landscape, balancing concerns over inflation with the need to support economic growth
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.Inflation Concerns
Despite a recent easing in headline inflation, core inflation in Taiwan remains stubbornly high. The central bank faces the challenge of addressing these persistent inflationary pressures while avoiding further economic slowdown. Analysts suggest that the bank is likely to maintain a hawkish stance in its forward guidance, emphasizing its commitment to price stability
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.Economic Growth and Export Challenges
Taiwan's export-oriented economy has faced headwinds due to weakening global demand, particularly in the tech sector. The island's GDP growth forecasts for 2023 have been revised downward, with the statistics office now projecting a 1.61% expansion, down from the previous estimate of 2.12%
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.Global Economic Factors
The decision to hold rates steady aligns with the actions of other major central banks in the region. Both the European Central Bank and the Bank of Japan have recently opted to maintain their current policy rates. Taiwan's central bank is closely monitoring global economic conditions, including the potential for further rate hikes by the U.S. Federal Reserve
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Future Policy Outlook
While the consensus points to a rate hold this week, some economists believe that the central bank's tightening cycle may not be over. The persistent core inflation and the potential for further U.S. rate hikes could influence Taiwan's monetary policy in the coming months. However, any future rate adjustments are expected to be modest, given the current economic challenges
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.Impact on Currency and Markets
The Taiwan dollar has shown resilience against the U.S. dollar, appreciating by about 2.5% in 2023. This performance stands out among Asian currencies and reflects the relative strength of Taiwan's economy despite global uncertainties. The central bank's decision and forward guidance will be closely watched by market participants for potential impacts on currency valuations and broader financial markets
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