Taiwan central bank seen standing pat this week and all of 2024- Reuters poll

12:42 am Monday, December 11th, 2023

TAIPEI (Reuters) – Taiwan’s central bank is expected to leave its policy rate unchanged this week as inflation gradually cools and indeed keep it steady for all of next year, according to economists in a Reuters poll.

The central bank is likely to keep the benchmark discount rate at 1.875% at its quarterly meeting on Thursday, according to 28 of the 29 economists surveyed.

Economists who answered questions on the outlook beyond this week predicted the bank would start cutting rates only from the first quarter of 2025. The median estimate was for a drop to 1.75%.

The bank paused raising rates in June. It has raised rates five times since March last year, by a total of 75 basis points, to help curb inflation.

Taiwan’s central bank often takes its cues from its U.S. counterpart. The Federal Reserve is also expected to keep rates in its current 5.25%-5.50% range when it meets this week. It has left policy on hold since July.

Inflation in Taiwan has been trending down since the start of the year, although the headline consumer price index (CPI) beat expectations with a 2.92% rise in November from a year ago amid higher food prices.

That said, the overall trend is down and core inflation has slowed, said Kevin Wang, an analyst at Taishin Securities Investment Advisory.

“This would let Taiwan’s central bank have peace of mind somewhat. We expect the central bank to hold rates steady,” he added.

The central bank will also announce revised GDP forecasts on Thursday.

Exports for the trade-dependent island remain sluggish, expanding only 3.8% last month from a year earlier but the domestic economy is faring much better, with unemployment at its lowest in almost 23 years.

Taiwan is a major producer of semiconductors used in everything from cars to smartphones, but soft demand and high inflation globally has prompted the government to revise down its 2023 economic growth to 1.42%, its slowest pace in 14 years.

In September, at its last quarterly meeting, the central bank cut its forecast for this year to an expansion of 1.46% from a forecast of 1.72% in June, but predicted a rebound in 2024 with growth of 3.08%.

(Poll compiled by Milounee Purohit, Anant Chandak and Carol Lee; Reporting by Faith Hung and Liang-sa Loh; Editing by Ben Blanchard and Edwina Gibbs)