Central Bank leaves rates unchanged in March

Wait-and-see approach continues: At its meeting on 19 March, Taiwan’s Central Bank decided to keep the discount rate unchanged at 2.00%, where it’s been since early 2024.

Strong GDP growth and mild inflation drive hold: Rate cuts were not warranted, given that the economy is performing well as the export sector rides the global AI boom. On the flipside, rate hikes were unnecessary given that inflation has been moderate at between 1.0% and 2.0% for most of the past year and should remain mild going forward. Elevated uncertainty over U.S. trade policy and the impact of the Iran war was another reason to stay on hold.

No major deviations in monetary policy expected: The Central Bank did not provide specific forward guidance on the future direction of interest rates. Most panelists see rates remaining on hold this year; with modest inflation and strong economic growth forecast, there will likely be little pressure to change monetary policy in either direction. However, a few panelists see rate cuts and one sees a hike.

Panelist insight: On the outlook, EIU analysts said: “We expect the Central Bank of the Republic of China (Taiwan), or CBC, to hold its benchmark policy rate, the discount rate, at 2% over 2026. The resumption of interest-rate cuts by the Federal Reserve (the US central bank) in late 2025 has provided the CBC with enough space to ease its own policy stance. However, Taiwan's strong economic momentum has reduced the urgency for the central bank to ease credit conditions” In contrast, Goldman Sachs analysts said: “We continue to expect Taiwan's central bank to raise the policy rate twice by 12.5bp each in 2026 (in Q2 and Q4), although with higher uncertainty on the timing given the supply shock to inflation and economic activity, of which duration and intensity remains highly unclear.”

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