(Dec 18): Taiwan held its policy rate for the seventh straight quarter — the longest stretch since 2021 — as the economy booms on global demand from artificial intelligence (AI) developers for its tech products.
The monetary authority left the benchmark rate unchanged at 2%, according to a statement released after its quarterly meeting on Thursday. All 32 of the economists surveyed by Bloomberg News had predicted the move.
Underscoring the positive outlook for Taiwan’s growth, the median estimate for a reduction is the end of 2027, versus an earlier survey that foresaw easing starting in the first quarter of next year.
The monetary authority has room to keep the rate at the highest since 2008 because the economy is on pace to be one of the world’s best performers this year. The central bank revised its GDP growth forecast for this year to 7.31%, which is up from its earlier 4.55% call and in line for the fastest since 2010.
The self-ruled democracy’s exports surged a whopping 56% in November from a year earlier, with shipments of semiconductors and other electronics jumping some 84%. And in a sign that momentum for AI infrastructure buildouts is intact, defying bubble concerns, last week Taiwan Semiconductor Manufacturing Co said monthly revenue rose 24.5%.
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The Taiwanese monetary authority “kept its rates on hold as expected, with large growth forecast revisions,” said Bumki Son, economist at Barclays Bank plc.
Taiwan “is in a good place to wait for more data to determine the policy rate path”, he added. “Looking ahead, the lowered inflation forecast and expected moderation in the growth outlook likely keeps the likelihood of a cut alive in 2026, in our view.”
The central bank has room to ease given inflation has been below its 2% preferred threshold. The central bank said on Thursday it sees the 2025 consumer price index coming in at 1.66%, down from a previous 1.75% forecast.
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It also has reason for concern about the consumer sector. A key measure of consumer confidence is hovering near the lowest level in a year, according to the Research Centre for Taiwan Economic Development, a non-governmental organisation.
And Hyosung Kwon, Korea and Taiwan economist for Bloomberg Economics, wrote that household consumption is projected to grow just 1.1% this year, trailing economic growth.
The central bank said in a statement on Thursday that it expected private consumption momentum to pick up in 2026, citing factors such as “an increase in minimum wage, a higher tax deduction allowance and growing profits of firms”.
It added that “the disruption to car sales due to uncertainties surrounding tariffs for imported cars is expected to go away next year, too”.
By holding its benchmark rate again, Taiwan’s central bank is saving its powder should talks with the US to lower a 20% tariff rate stall. Earlier this month, Commerce Secretary Howard Lutnick said that the US expected a large investment pledge from Taiwan in the negotiations but President Lai Ching-te listed several areas that need improvement for projects to be completed.
Lai pointed to US government help in areas like land acquisition, water and electricity supply, and talent development.
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