Taiwan central bank raises growth outlook, flags inflation concerns
It raises its economic growth forecast to 9.45% from March’s prediction of 7.25%
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[TAIPEI] Taiwan’s central bank on Thursday (Jun 18) raised its growth outlook for the year thanks to the artificial intelligence boom, while keeping its policy interest rate steady as expected, though the decision was not unanimous due to inflation concerns.
The central bank also said it needed to be a bit more hawkish.
The economy grew 8.7 per cent in 2025 for the fastest rate in 15 years, buoyed by high demand from companies such as Nvidia for semiconductors used in artificial intelligence applications.
The bank raised its economic growth forecast to 9.45 per cent from March’s prediction of 7.25 per cent.
The continued expansion of business opportunities from AI and other emerging technology applications is expected to drive steady export growth this year, governor Yang Chin-long told reporters after a quarterly rate-setting meeting.
The central bank left the benchmark discount rate at 2 per cent, in line with predictions from a Reuters poll in which 27 out of 30 economists forecast no change.
Yang said two members of the bank’s board cited the risk of inflation in not backing the decision to keep the rate steady.
“Basically, so far, it is not yet time to raise interest rates; it still depends on the data,” he added.
“Several board members reminded us that inflationary pressure needs to be closely monitored, so we need to be slightly more hawkish.”
The central bank lifted its consumer price index forecast for this year to 1.91 per cent, up from its March forecast of 1.8 per cent.
In May, inflation rose above the central bank’s 2 per cent “warning” line, hitting 2.2 per cent, its highest level in more than a year, due to the impact of rising energy prices.
KGI Securities Investment Advisory chairman Chu Yen-min said the central bank would probably take action only if inflation climbed to 3 per cent.
“Therefore, based on inflation conditions, Taiwan has not yet reached the point where an interest-rate hike is warranted,” he noted.
Taiwan’s rate decision came after the US Federal Reserve held its benchmark interest rate steady, though new quarterly projections showed that officials expect a hike in borrowing costs later this year on increasing inflation concerns. REUTERS
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