Taipei, Taiwan – The central bank of Taiwan is anticipated to keep its policy interest rate unchanged at 2 percent during its upcoming quarterly meeting on Thursday, according to a Reuters poll of economists. This decision reflects ongoing inflation concerns and a cautious approach towards economic stability.
Steady Interest Rates Ahead
The central bank’s last adjustment occurred in March when it raised the benchmark discount rate from 1.875 percent to 2 percent, primarily in response to anticipated electricity price hikes. Economists predict that the bank will maintain this rate at its next meeting, aligning with the forecasts of all 32 experts surveyed.
Future Rate Cuts Expected in 2025
Looking beyond this week, economists forecast that the central bank will not begin to lower rates until the third quarter of 2025. The median projection indicates a potential reduction to 1.875 percent by then. This forecast is influenced by the current inflationary pressures, which, although less severe than in major Western economies, remain a key focus for Taiwan’s monetary policy.
Inflation and Economic Growth
In August, Taiwan’s Consumer Price Index (CPI) increased by 2.36 percent, surpassing earlier expectations. Despite this, Taiwan’s inflation rate remains relatively moderate compared to Western standards. The central bank views the 2 percent rate as a critical threshold and aims to stabilize inflation around this mark.
Hsu Chih-yen from MasterLink Securities noted that the central bank’s stance is not aligned with the U.S. Federal Reserve, which is anticipated to implement a quarter-point rate reduction this week. This decision follows last week’s rate cut by the European Central Bank, which also signaled a potential reduction path in the future due to slowing inflation and economic growth in the eurozone.
Economic Outlook
Taiwan’s economy, heavily reliant on the technology sector and exports, has benefited from the global AI boom, boosting orders for major players like TSMC, the world’s leading contract chipmaker. However, the Taiwan statistics bureau recently revised its economic growth forecast for 2024 down to 3.9 percent from a previous estimate of 3.94 percent, citing weaker export projections and uncertainties in AI demand.
The central bank is set to release its updated economic growth and inflation forecasts for the current year and its initial predictions for the next year on Thursday.
Conclusion
As Taiwan grapples with inflation and economic uncertainties, the central bank’s decision to hold interest rates steady underscores its commitment to controlling inflation while navigating global economic challenges. Market participants will be closely watching the upcoming announcement for further insights into Taiwan’s economic trajectory.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna Sahu holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.
