Central bank cuts 2025 CPI growth forecast, leaves GDP unchanged

Taipei, June 19 (CNA) The Central Bank of the Republic of China (Taiwan) said on Thursday that it has cut its forecast for growth in the country's consumer price index (CPI) for 2025 to 1.81 percent, while leaving its estimate of local gross domestic product (GDP) growth unchanged at 3.05 percent.

The central bank said in a statement after wrapping up a quarterly policymaking meeting that the increase in the cost of services is expected to slow down and international crude oil prices are likely to fall in the second half of this year, while a higher Taiwan dollar will make imports less expensive. As a result, the local CPI is expected to grow 1.81 percent in 2025, a cut from 1.89 percent the bank forecast in March.

The central bank also cut expected growth in core CPI, which excludes fruit, vegetables and energy, from 1.79 percent to 1.69 percent. The forecasts are lower than the 2 percent alert set by the bank.

However, the central bank maintained its forecast of Taiwan's GDP growth forecast at 3.05 percent, citing uncertainties created by the Trump administration's tariff polices which are likely to affect the global economy.

U.S. President Donald Trump first announced "reciprocal" tariffs on April 2 on countries with high trade surpluses with the United States. These included a 32 percent import duty on goods from Taiwan, though Trump announced a 90-day pause a week later to allow negotiations for a lower levy.

In addition to strong global demand for artificial intelligence applications, the central bank said, the 90-day pause has prompted foreign buyers to place orders ahead of schedule to avoid tariffs, which boosted Taiwan's exports and private investments in the first half of the year, but the pace will slow down in the second half.

According to the central bank, Taiwan's GDP is expected to grow 5.49 percent in the first half of the year, but to slow to only 0.78 percent thereafter.

After the adjustments in its forecasts, the central bank came closer to the Directorate General of Budget, Accounting and Statistics (DGBAS), which said in late May that Taiwan's GDP is estimated to grow 3.10 percent in 2025 with 5.35 percent expected in the first half and 1.0 percent in the second half of the year.

The DGBAS has forecast Taiwan's CPI will grow 1.88 percent this year.

The central bank also decided to leave interest rates unchanged after the policymaking meeting, saying it will watch closely how U.S. tariff policies evolve, how the major central banks in the world adjust their monetary policies and how geopolitical unease develops.

After the decision, the local discount rate will stay at 2 percent, which is still the highest in 15 years.

Speaking with reporters after the policymaking meeting, Central Bank Governor Yang Chin-long (楊金龍) said he did not see any immediate need to cut interest rates as the local financial market is faced with tremendous uncertainties.

Yang said there is no sign of any significant deterioration in the local economy to prompt the central bank to kick off a preventive rate cut cycle for the moment, although GDP growth will slow down sharply in the second half of this year.

At the policymaking meeting, the central bank did not come up with any new control measures for the local housing market. In September last year, the bank imposed a seventh tranche of selective credit controls on the market, which property dealers claimed were the most severe in history by further capping mortgages home buyers can secure to rein in housing prices.

After the September measures, home transactions have been weakening with housing price growth moderating, the central bank said.

The local banking sector saw the ratio of mortgages to total lending decline to 37.1 percent at the end of May, but the level is still not low enough, Yang said

The central bank is concerned that in the event of a rate cut, the housing market would become warmer, he added.

However, even if the central bank sees the timing is right to cut interest rates, it will continue to monitor closely the housing market and impose complementary measures to ensure speculation does not return and home buyers do not anticipate that the market will continue to grow hotter and hotter, Yang said.

Commenting on the appreciating Taiwan dollar, which has soared more than 10 percent against the U.S. dollar this year, Yang said the strength was acceptable, although the central bank earlier admitted to intervening in the market to slow down the rising value of the currency.

With Taiwan's economic growth expected to slow down and U.S. tariff policies likely to become clearer in the second half of the year, the appreciation of the local currency could moderate accordingly, Yang added.