Taiwan set to hold rates steady amid inflation concerns: Reuters poll

TAIPEI: Taiwan’s central bank is expected to hold its policy interest rate steady this week and to stay the course until early next year as it navigates ongoing concerns over inflation, according to economists in a Reuters poll.

The central bank is likely to maintain the benchmark discount rate at 1,875 percent at its quarterly meeting on Thursday, according to 25 of the 26 economists surveyed.

Economists who answered questions on the outlook beyond this week predicted the bank would start cutting rates only from the second quarter of 2025, with the median estimate dropping to 1.75 per cent.

Central bank Governor Yang Chin-Long said last week it would probably not cut interest rates before June as it may be necessary to raise the 2024 inflation forecast because of rising consumer prices.

Taiwan’s consumer price index (CPI) rose 3.08 per cent in February, a 19-month high, as food prices rose during the Lunar New Year holiday. Inflation is widely expected to remain high in light of potential electricity price increases in April.

“The central bank’s consideration is that inflation is still high, and they are worried about that,” said analyst Woods Chen of Yuanta Securities Investment.

The bank paused rate rises last June. It has lifted rates five times since March 2022 by a total of 75 basis points in an effort to curb inflation.

The central bank will also its revised economic growth and inflation forecasts on Thursday.

In December, the central bank raised its gross domestic product growth forecast for 2024 to 3.12 per cent, up slightly from a previous prediction of 3.08 per cent, on rebounding tech demand.

Taiwan is a major producer of semiconductors used in everything from cars to smartphones, but soft demand and high inflation globally saw the island’s economy grow just 1.31 per cent last year, its slowest pace in 14 years.

(Poll compiled by Devayani Sathyan, Veronica Khongwir and Carol Lee; Reporting by Faith Hung and Liang-sa Loh; Editing by Ben Blanchard and Jamie Freed)