Taiwan's central bank is anticipated to maintain its current policy rate this week and throughout the entirety of 2024, as inflation gradually eases, according to a recent survey of economists conducted by Reuters.
It is expected that the central bank will leave the benchmark discount rate unchanged at 1.875% during its upcoming quarterly meeting, with 28 out of 29 surveyed economists concurring on this prediction.
Looking ahead to the year 2025, economists in the survey projected that the central bank might consider rate cuts, possibly commencing in the first quarter of that year. The median estimate for the rate reduction was 1.75%. Notably, the central bank had previously halted rate hikes in June after raising rates five times since March of the previous year, with a cumulative increase of 75 basis points aimed at addressing inflationary pressures.
Taiwan's central bank often aligns its monetary policies with its U.S. counterpart. The Federal Reserve is also expected to maintain its current rate range of 5.25%-5.50% during its upcoming meeting this week, having kept its policy unchanged since July.
In terms of inflation trends in Taiwan, there has been a gradual decline throughout the year, although the headline consumer price index (CPI) surpassed expectations with a 2.92% year-on-year increase in November, mainly driven by higher food prices. However, the overall trend remains downward, and core inflation has decelerated, as noted by Kevin Wang, an analyst at Taishin Securities Investment Advisory.
Wang stated, "This would let Taiwan's central bank have peace of mind somewhat. We expect the central bank to hold rates steady."
In addition to its policy decision, the central bank will release revised GDP forecasts during its upcoming meeting.
While Taiwan's exports have shown modest growth, expanding by only 3.8% year-on-year last month, the domestic economy has demonstrated resilience, with unemployment rates reaching their lowest levels in nearly 23 years.
Taiwan is a significant producer of semiconductors, which are used in a wide range of products, from automobiles to smartphones. Nonetheless, global soft demand and inflationary pressures have led the government to revise down its 2023 economic growth forecast to 1.42%, marking the slowest pace in 14 years. In its last quarterly meeting in September, the central bank adjusted its growth projection for the current year to 1.46% from the earlier estimate of 1.72% in June, while anticipating a rebound in 2024 with projected growth of 3.08%.
