Taipei: Taiwan’s central bank is expected to keep its key interest rates unchanged for the sixth consecutive quarter at a policymaking meeting scheduled for Sept. 18, as uncertainties stemming from U.S. tariff policies persist despite a strong likelihood of a rate cut by the U.S. Federal Reserve this month.
According to Focus Taiwan, Cathay United Bank chief economist Lin Chi-chao noted that the central bank requires additional time to evaluate Taiwan’s export performance following the implementation of the U.S. “reciprocal tariffs.” These tariffs, effective from Aug. 7, include a 20 percent levy on Taiwanese goods, influencing the central bank’s monetary policy decisions.
Lin indicated that the central bank might delay any rate adjustments until December, when more comprehensive economic data becomes available. In June, the central bank had maintained its policy rate, with the local discount rate at 2 percent, marking the highest in 15 years.
While U.S. tariffs have impacted some traditional industries, Taiwan’s technology sector has shown resilience, continuing to expand capital investments to meet global demand. This prompted the Directorate General of Budget, Accounting and Statistics to revise its 2025 GDP growth forecast from 3.10 percent to 4.45 percent.
“It is hard for the central bank to follow the Fed and cut interest rates now,” Lin remarked. “The bank needs more economic data to evaluate when to begin a preventive rate-cut cycle.”
Echoing Lin’s views, Wu Meng-tao, head of the sixth research division at the Taiwan Institute of Economic Research, stated that he does not foresee the central bank easing monetary policy until the first quarter of next year. Wu highlighted a Section 232 investigation launched by Washington in April, which could lead to tariffs on semiconductors. Although major players like Taiwan Semiconductor Manufacturing Co. might secure exemptions, smaller firms in the supply chain could be affected.
Wu emphasized that an immediate rate cut would limit the central bank’s ability to address potential semiconductor tariffs in the future.
Market observers are also keen to see the central bank’s response to the government’s recent relaxation of rules on the “mortgage program 2.0” for young homebuyers, initiated in August 2023.
Recently, the Cabinet declared that mortgages under the subsidy program will not be subject to restrictions under the Banking Act, allowing banks to extend more mortgages to young borrowers, thereby supporting the housing market and potentially increasing home prices.
In September 2024, the central bank implemented a seventh round of selective credit controls, described by property dealers as the most stringent in history, to curb soaring housing prices. Lin mentioned that these credit controls have been effective, and the central bank needs to evaluate the impact of the relaxed mortgage rules.
