Taipei: Local economists anticipate that Taiwan’s central bank will keep its key interest rates unchanged for the seventh consecutive quarter during its upcoming policymaking meeting on Thursday. This expectation is largely attributed to the country’s robust economic growth and stable inflation rates.
According to Focus Taiwan, Cathay United Bank’s chief economist, Lin Chi-chao, highlighted forecasts from the Directorate General of Budget, Accounting and Statistics (DGBAS) predicting Taiwan’s economy to grow by 7.37 percent this year and 3.54 percent in 2026. Lin pointed out that the DGBAS has adjusted its inflation forecast to 1.67 percent for this year, comfortably below the central bank’s 2 percent alert level. This provides the bank with little motivation to modify interest rates. Lin emphasized that unless there is a noticeable decline in Taiwan’s exports, the central bank is unlikely to reduce rates.
In September, the central bank maintained the local discount rate at 2 percent, marking the highest level in 15 years. Wu Meng-tao, head of the sixth research division at the Taiwan Institute of Economic Research (TIER), concurred with Lin, stating that there is no pressing need for a rate cut. He suggested that the central bank might retain current rates through the first half of 2026, while observing the global economic landscape.
Both Lin and Wu emphasized the importance of monitoring the Taiwan dollar’s value against the U.S. dollar as a central bank priority. Wu indicated that the central bank must remain vigilant in the currency market to prevent a repeat of the Taiwan dollar’s rapid appreciation seen in May 2025, which affected Taiwanese exporters, especially in non-high-tech sectors. Lin warned that the next U.S. Federal Reserve chairperson, to be appointed by U.S. President Donald Trump, might aim to weaken the greenback, potentially narrowing the interest rate gap between the United States and Taiwan, thus exerting upward pressure on the Taiwan dollar.
In May, the Taiwan dollar experienced a significant 6.98 percent rise against the U.S. dollar. This was the largest monthly increase in 36 years, driven by speculation of Taiwan’s intent to bolster its currency during tariff negotiations with the U.S. The currency reached a high of NT$29.910 against the U.S. dollar on May 28, before settling at NT$31.202 at the close of the foreign exchange market on Friday, aiding exporters in regaining competitiveness.
Meanwhile, another TIER economist, Liu Pei-chen, noted that the central bank is likely to continue its selective credit controls in the housing market to curb property speculation and rising home prices. Liu suggested that any relaxation of this policy might occur in the first half of 2026. The seventh round of selective credit controls, implemented in September 2024, has already led to reduced transactions and slowed the rise in housing prices.