Taiwan interest rates seen likely to remain unchanged for 9th straight quarter

Taipei, March 16 (CNA) Taiwan's central bank is expected to leave its key interest rates unchanged for the ninth consecutive quarter due to the ongoing Middle East war, economists said, ahead of the bank's upcoming policymaking meeting slated for Thursday.

Amid the Middle East conflict, global energy prices have been on the rise, with crude oil prices topping US$100 per barrel at one point, which has raised concerns over inflation and the global economy, factors that impact the monetary policies of major central banks worldwide, the economists noted.

In December, Taiwan's central bank kept the local discount rate at a 15-year high of 2 percent, the rate on accommodations with collateral at 2.375 percent, and the rate on accommodations without collateral at 4.250 percent.

The markets are anticipating that the U.S. Federal Reserve will also keep interest rates steady, ending three straight rate cuts, when its two-day policymaking meeting wraps up Thursday morning (Taipei time).

Cathay United Bank chief economist Lin Chi-chao (林啟超) told CNA over the weekend that Taiwan's central bank needs more time to observe the Middle East situation, as it has been less than two weeks since the war broke out.

While the Taiwan central bank is expected to maintain its monetary policy when it meets Thursday, its board members are likely to focus on the wild fluctuations of crude oil prices, Lin said.

Any sustained increase in energy prices will push up shipping costs, which in turn will result in higher imported and domestic product prices, he said.

At Thursday's meeting, Economics Minister Kung Ming-hsin (龔明鑫), who sits on the central bank's board, is likely to focus on ways to respond to the volatile global situation, Lin said.

Meanwhile, Wu Meng-tao (吳孟道), an economist at the Taiwan Institute of Economic Research (TIER), said that while inflation is now the central bank's main concern, rising energy prices will not immediately affect local consumer prices, as the Ministry of Economic Affairs has an energy price stabilization mechanism in place.

Consumers in Taiwan are not likely to feel the effects of the soaring energy prices until the second half of the year, Wu said.

Echoing Lin's view that the Taiwan central bank will maintain its monetary policy for the time being, Wu noted that the Directorate General of Budget, Accounting and Statistics has raised its 2026 economic growth forecast sharply to 7.71 percent from 3.54 percent due to an AI boom with the growth of the consumer price index (CPI) still below 1.5 percent in the first two months of this year, compared with a 2 percent alert set by the bank.