©Reuters. File photo: People buy food at a market in New Taipei City, Taiwan, January 31, 2024. REUTERS/Ann Wang/File Photo
TAIPEI (Reuters) – Taiwan’s central bank is expected to keep its key interest rate unchanged this week and stay the course until early next year to address ongoing inflation concerns, a Reuters poll of economists showed.
The central bank is likely to keep its benchmark discount rate at 1.875% at its quarterly meeting on Thursday, according to 25 of 26 economists surveyed.
Economists who responded to questions about the outlook beyond this week predicted the bank would only begin cutting rates starting in the second quarter of 2025, with the median estimate falling to 1.75%.
Central bank governor Yang Chin-Long said last week he would likely not cut interest rates before June as he may need to raise inflation forecasts for 2024 due to rising consumer prices.
Taiwan’s consumer price index (CPI) rose 3.08% in February, the most in 19 months, as food prices rose during the Lunar New Year holiday. Inflation is expected to remain elevated in light of potential increases in electricity prices in April.
“The central bank’s view is that inflation is still high, and they are concerned about that,” said analyst Woods Chen of Yuanta Securities Investment.
The bank suspended rate hikes last June. It has raised rates five times since March 2022 by a total of 75 basis points in a bid to curb inflation.
The central bank will also announce revised forecasts for economic growth and inflation on Thursday.
In December, the central bank raised its gross domestic product growth forecast for 2024 to 3.12%, up slightly from its previous forecast of 3.08%, on the back of a recovery in technology demand.
Taiwan is a major producer of semiconductors used in everything from cars to smartphones, but weak demand and high inflation globally saw the island’s economy grow just 1.31% last year, the pace slower than the last 14 years.
(Survey compiled by Devayani Sathyan, Veronica Khongwir and Carol Lee; Reporting by Faith Hung and Liang-sa Loh; Editing by Ben Blanchard and Jamie Freed)