Taiwan set to hold rates steady on inflation worries: Reuters poll By Reuters

TAIPEI (Reuters) – Taiwan’s central bank is expected to keep its policy interest rate unchanged this week and hold steady until the end of next year as it deals with lingering inflation concerns, economists said in a survey Reuters.

The central bank left the benchmark discount rate at 2 percent as expected at its last quarterly meeting in June, after raising it to that level from 1.875 percent at the previous meeting in March, ahead of a rise in electricity prices.

At its next quarterly meeting on Thursday, it is again expected to hold the rate steady, according to all 32 economists polled.

Economists asked about the outlook beyond this week predicted the bank would only start cutting rates from the third quarter of 2025, with the median estimate of a cut at 1.875%.

Inflation in Taiwan has never been as high as in major Western economies – the consumer price index (CPI) in August rose 2.36% higher than forecast – but the central bank has made reducing it a priority and considers 2% to be the “warning line”.

Hsu Chih-yen of MasterLink Securities said that given Taiwan’s inflation, takeover was the most likely outcome.

“The central bank will not follow the Fed,” Hsu said, referring to the US Federal Reserve, which is expected to cut at least a quarter point this week.

Last week, the European Central Bank cut interest rates again and signaled a “downward trajectory” for borrowing costs in the coming months as inflation slows and growth in the euro zone falters.

Taiwan’s tech-centric, export-dependent economy has thrived on demand due to an artificial intelligence (AI) boom that has generated orders for TSMC, the world’s largest chipmaker.

But last month, Taiwan’s statistics bureau cut its economic growth forecast for this year to 3.9% from a previous +3.94% on weaker-than-expected exports and noted some uncertainty in AI demand .

The central bank will announce its own revised growth and inflation forecasts for this year and give its first forecasts for next year on Thursday.

(Polling by Susobhan Sarkar and Anant Chandak; Reporting by Ben Blanchard; Additional reporting by Roger Tung and Liang-sa Loh; Editing by Stephen Coates)