Taiwan’s Central Bank to Hold Rates Steady Amid Inflation and Trade Concerns

Taiwan’s central bank is expected to keep its policy interest rate unchanged at 2% this week and maintain stability through early 2026, according to a Reuters poll of 33 economists. The decision comes as policymakers navigate inflation pressures and uncertainties tied to U.S. tariffs.

Last December, the central bank held the benchmark discount rate at 2% after a previous hike from 1.875% in March 2023, anticipating rising electricity costs. While inflation remains a concern, Taiwan’s consumer price index (CPI) rose by a lower-than-expected 1.58% in February, staying below the 2% warning threshold.

Taiwan’s economy, heavily reliant on exports, has been buoyed by strong demand from the artificial intelligence (AI) boom, particularly benefiting TSMC, the world’s leading contract chipmaker. The economy is projected to expand over 3% this year, though growth will slow from last year’s 4.59%.

Economists caution that external risks, particularly potential U.S. tariffs under President Donald Trump, could impact Taiwan’s trade-driven economy. Oxford Economics noted that while future electricity price hikes may push inflation higher, concerns over global trade tensions are likely to keep the central bank cautious.

The U.S. Federal Reserve is also expected to hold interest rates steady this week, adding to the global monetary policy outlook. Taiwan’s central bank will release updated economic growth and inflation forecasts alongside its rate decision on Thursday.