Taiwan’s central bank is widely expected to keep its benchmark interest rate unchanged this week, with economists also projecting policy stability through 2027, according to a Reuters poll, as strong economic growth offsets near-term inflation pressures.
In March, the central bank left its discount rate at 2%, in line with expectations. The last adjustment came in March 2024, when it raised the rate by 0.125 percentage points to 1.875% ahead of anticipated electricity price increases.
At its quarterly meeting on Thursday, 27 of 30 economists surveyed expect the bank to maintain the current rate, while the remaining three forecast a modest hike to 2.125%. Beyond this week, all respondents who provided longer-term projections expect rates to remain unchanged through the end of 2027.
Taiwan’s export-driven, technology-heavy economy has been buoyed by global demand tied to artificial intelligence, particularly benefiting major chipmakers such as Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip producer.
The government’s statistics agency said last month the economy is projected to expand by 9.64% this year, its fastest pace in 16 years, following growth of 8.68% in 2025.
However, inflationary pressures are emerging, with consumer prices rising 2.2% in May, above the central bank’s 2% caution threshold and the highest level in more than a year.
Cathay United Bank chief economist Lin Chi-chao told Reuters that sustained increases in fuel costs, potentially linked to disruptions in the Strait of Hormuz amid the Iran conflict, could force the central bank to reconsider its policy stance in the second half of the year.
“If the Strait of Hormuz remains blocked for an extended period and does not return to prewar traffic levels, the tone of the press conference following this month’s central bank board meeting may lean hawkish,” Lin said.
His comments came after U.S. and Iranian officials said on Sunday they had agreed on a framework to end their war, lift the U.S. blockade on Iran and reopen the strategic waterway, though key details remain under negotiation.
The central bank is also expected to release updated forecasts for economic growth and inflation on Thursday, which analysts say will be closely watched for any shift in policy bias.
