Taiwan central bank to keep rates unchanged, experts predict

Taipei, Dec. 15 (CNA) Local economists expect Taiwan's central bank to leave its key interest rates unchanged for a seventh straight quarter at its next policymaking meeting Thursday because of the country's strong economic growth and stable inflation.

Economists do not believe the local central bank will be influenced by the U.S. Federal Reserve's decision last week to cut interest rates for a third consecutive policymaking meeting.

Citing the latest forecasts by the Directorate General of Budget, Accounting and Statistics (DGBAS), Cathay United Bank chief economist Lin Chi-chao (林啟超) told CNA that Taiwan's economy would likely grow 7.37 percent this year and 3.54 percent in 2026.

At the same time, inflation seems to be tamed as the DGBAS cut its inflation forecast to 1.67 percent for this year, below the 2 percent alert set by the bank, Lin said, giving the bank little incentive to adjust its key interest rates.

"Unless Taiwan's exports show signs of an apparent decline, it will be hard for the central bank to find a reason to cut interest rates," Lin said. "It will undoubtedly leave rates unchanged this time."

In September, the central bank kept the local discount rate at 2 percent, already the highest level in 15 years.

Echoing Lin, Wu Meng-tao (吳孟道), head of the sixth research division at the Taiwan Institute of Economic Research (TIER), said there was no urgency for the central bank to cut rates now.

He suggested the central bank could even maintain the current rates into the first half of 2026 while observing how the global economy evolves.

Currency value a priority

Both Lin and Wu saw monitoring and reacting to the Taiwan dollar's value against that of the U.S. dollar as one of the local central bank's key priorities in the near future.

Wu said the central bank needed to pay close attention to the currency market to avoid a repeat of the rapid appreciation of the Taiwan dollar seen in May 2025, which put pressure on Taiwanese exporters, in particular in the non-high-tech sector.

Lin cautioned that the next chairperson of the U.S. Federal Reserve, to be appointed by U.S. President Donald Trump, could be willing to weaken the greenback and narrow the interest rate gap between the United States and Taiwan.

That would mean that the Taiwan dollar, buoyed by relatively strong economic growth, could face upward pressure.

In May, the Taiwan dollar rose 6.98 percent against the U.S. dollar, the highest monthly increase in 36 years on speculation that Taiwan had an intent to boost the local currency to please the U.S. during the tariff negotiations.

It hit a closing high of NT$29.910 against the U.S. dollar on May 28, but the greenback had recovered to NT$31.202 at the close of the foreign exchange market Friday, helping exporters regain some of the competitiveness they lost due to the higher exchange rate.

Selective credit control

Meanwhile, another TIER economist, Liu Pei-chen (劉佩真), told CNA that the central bank would likely maintain its most recent round of selective credit controls in the housing market for the time being to keep a lid on property speculation and rising home prices.

Any easing of the policy would likely come in the first half of 2026, Liu said.

The seventh round of selective credit controls imposed in September 2024 has resulted in a fall in transactions and a slowdown in the rise of housing prices.