TAIPEI (Reuters) -Taiwan's central bank is likely to maintain its policy interest rate this week and keep it steady through the first quarter of 2026 because of the strong performance of the tech-focused economy, according to economists in a Reuters poll.
In June, the central bank left the benchmark discount rate at 2%, as expected. It last raised the rate by 0.125 percentage points from 1.875% in March 2024, anticipating a rise in electricity prices.
At its next quarterly meeting on Thursday, the
central bank is expected to keep the rate unchanged according to 30 of 32 economists surveyed.
Economists who provided forecasts beyond this week predicted the bank will maintain its stance until the first quarter of 2026, when they forecast a rate cut to 1.875%.
Taiwan's tech-centred, export-dependent economy has been supported by demand from the artificial intelligence boom, which has driven orders for companies such as TSMC, the world's largest contract chipmaker.
The economy is expected to expand 4.45% this year due to the AI boom, the government's statistics agency said in August. That would be slower than last year's growth of 4.59%, while government statisticians project next year will see further deceleration to 2.81% given uncertainty over U.S. tariffs.
Taiwan exports are subject to a 20% U.S. tariff, as part of President Donald Trump's sweeping measures targeting imports from across the globe, though Taipei remains in talks with Washington to get a better deal.
"Given Taiwan's GDP growth in the second half will remain moderate, the central bank will see no urgent need to cut interest rates this year," said analyst Chiang Kuang-yu of Masterlink Investment Advisory, adding the earliest timing for a rate cut would be the first half of next year.
The Taiwan central bank decision will come one day after the U.S. Federal Reserve, which is widely expected to cut its key interest rate by 25 basis points as labour market softness overshadows inflation risks.
On inflation, Taiwan's consumer price index (CPI) rose by 1.6% in August, the fourth month in a row it has been below the central bank's 2% "warning" line.
Taiwan's central bank will also announce its revised economic growth and inflation forecasts for this year on Thursday.
(Poll compiled by Carol Lee; Reporting by Ben Blanchard and Faith Hung; Additional reporting by Roger Tung)
