Taiwan likely to hold rates steady but inflation a concern ahead

TAIPEI - Taiwan's central bank is expected to hold its policy interest rate steady this week and keep it in place into 2027, according to economists polled by Reuters, given the economy's strength, but inflation concerns could weigh looking ahead.

In March, the central bank left its benchmark discount rate at 2%, as expected. It last raised the rate by 0.125 percentage points from 1.875% in March 2024, in anticipation of a rise in electricity prices.

At its next quarterly meeting on Thursday, the central bank is expected to keep the rate unchanged, according to 27 of the 30 economists surveyed. The three dissenting voices saw the central bank raising the rate to 2.125%.

Economists who provided forecasts beyond this week believed the bank would maintain its stance through the fourth quarter of 2027.

Taiwan's tech-centred, export-dependent economy has benefited from the artificial intelligence boom, which has driven orders for companies like TSMC, the world's largest contract chipmaker.

The economy is expected to expand by 9.64% this year, the fastest pace in 16 years, the government's statistics agency said last month, after growing 8.68% in 2025.

However, inflation rose above the central bank's 2% "warning" line in May, hitting 2.2%, its highest level in more than a year.

Cathay United Bank chief economist Lin Chi-chao said if fuel costs continue to rise due to the blockage of the Strait of Hormuz from the Iran war the central bank will face pressure to raise interest rates in the second half to contain inflation.

"If the Strait of Hormuz remains blocked for an extended period and does not return to prewar traffic levels, the tone of the press conference following this month's central bank board meeting may lean hawkish," he added.

U.S. and Iranian officials said on Sunday they had agreed on a framework to end their war, halt the U.S. blockade of Iran and reopen the Strait of Hormuz.

Taiwan's central bank will also unveil its revised economic growth and inflation forecasts for this year on Thursday.

(Poll compiled by Susobhan Sarkar, Renusri K and Carol Lee; Reporting by Ben Blanchard and Faith Hung; Additional reporting by Roger Tung; Editing by Kim Coghill)

Copyright Reuters or USA Today Network via Reuters Connect.

This story was originally published June 14, 2026 at 11:47 PM.