Key facts
- Taiwan's central bank is widely expected to keep its benchmark interest rate at 2% at its upcoming meeting.
- Economists predict the policy rate will remain steady through the fourth quarter of 2027.
- Inflation in Taiwan exceeded the central bank's 2% warning threshold in May, reaching 2.2%.
- The central bank will release updated economic growth and inflation forecasts on Thursday.
- Potential disruptions to the Strait of Hormuz could increase pressure on the central bank to raise rates to combat inflation.
Taiwan's central bank is widely anticipated to maintain its benchmark interest rate at 2% during its upcoming quarterly meeting, according to a Reuters poll of economists. The majority of economists surveyed expect the rate to remain unchanged through the fourth quarter of 2027, citing the economy's strength, particularly its benefit from the artificial intelligence boom that has boosted orders for companies like TSMC. The tech-centric, export-dependent economy is projected to expand by 9.64% this year, the fastest pace in 16 years. However, inflation has become a growing concern, surpassing the central bank's 2% warning line in May to reach 2.2%, its highest level in over a year. Cathay United Bank chief economist Lin Chi-chao noted that rising fuel costs, potentially exacerbated by blockages in the Strait of Hormuz due to the Iran war, could pressure the central bank to adopt a more hawkish stance and raise interest rates in the latter half of the year to curb inflation. The central bank is also scheduled to release its revised economic growth and inflation forecasts for the current year on Thursday.