Central Bank leaves rates unchanged in December

Wait-and-see approach continues: At its meeting on 18 December, 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 weak 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 this year and should remain mild going forward. Elevated uncertainty over U.S. trade policy 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. Panelists are split on the outlook for 2026: Some see mild monetary easing to boost domestic demand, others expect the rate to remain at its current level, and one forecasts a rate hike.

Panelist insight: Giving their take on the outlook, Nomura analysts said: “[The latest] policy meeting reinforces our view that the CBC is likely to stay on an extended hold through end-2026 (terminal rate: 2.00%), with its revised economic projections showing above-trend economic growth and below-target inflation, signalling little urgency to skew policy rates in either direction. Conditions for rate cuts – in particular a potential harsh implementation of Section 232 semiconductor tariffs dealing a huge blow to economic growth – appear stringent, and are unlikely to materialize, in our view.”

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