By FocusEconomics
Taiwan Central Bank leaves rates unchanged in December. Latest bank decision: At its meeting on 19 December, Taiwan’s Central Bank decided to keep the discount rate unchanged at 2.00 percent.
Key drivers: The decision not to hike policy rates further was driven by moderate headline and core inflation: In recent months, both have been close to or below 2.0 percent. On the flipside, rate cuts were premature given solid economic growth and still-elevated property lending.
Little to no easing foreseen in 2025: The Central Bank provided no explicit forward guidance on the future direction of interest rates. Our Consensus is for interest rates to end 2025 slightly below their current level. However, rate cuts – if they occur at all – are only likely to ensue from H2 2025. Several panelists see rates unchanged throughout the year, with one even penciling in an increase.
Panelist insight: EIU analysts are among those seeing rate cuts:
“Our outlook […] expects the central bank to cut rates to adhere to an easing path in 2025, with the first cut now expected in March 2025. The dissipation of domestic consumer price pressures, as private consumption slows, will encourage an easing of credit conditions in 2025.”
In contrast, Nomura analysts said:
“As we believe the policy rate needs to be adjusted in line with solid economic fundamentals, we reiterate our view that the CBC will hike the policy rate by 12.5bp each in June and December, which will take the policy rate to 2.25 percent by end-2025 from 2.00 percent currently.”
DBS’ Ma Tieying said:
“Additional rate hikes seem unlikely, as overall inflation pressure is expected to ease. Rate cuts are also unlikely, as inflation-adjusted real rates will remain close to zero, and rate cuts would contradict the central bank’s efforts to cool the property and credit markets.”
