Taipei: Taiwan’s central bank is anticipated to maintain its key interest rates unchanged for the ninth consecutive quarter in the upcoming quarterly policymaking meeting scheduled for June 18. This decision comes despite robust domestic economic growth propelled by the AI boom, as forecasted by economists.

According to Focus Taiwan, rising international crude oil prices, driven by military conflicts in the Middle East, have fueled inflation and prompted major central banks, such as the European Central Bank (ECB) and the U.S. Federal Reserve, to adopt a more hawkish stance. However, Cathay United Bank’s chief economist, Lin Chi-chao, noted earlier this week that Taiwan’s central bank currently does not perceive an urgent need to tighten its monetary policy. Lin highlighted that Taiwan’s consumer price index (CPI) growth is expected to remain below the 2 percent alert level set by the bank for this year.

On Friday, the Directorate General of Budget, Accounting and Statistics (DGBAS) revised its forecast for Taiwan’s 2026 GDP growth to 9.64 percent from 7.71 percent, attributing the increase to AI-driven growth in exports and investments. Although the DGBAS also adjusted the CPI growth to 1.93 percent, it remains below the 2 percent threshold.

Lin emphasized that the government’s initiatives to stabilize prices, such as freezing the costs of domestic gasoline, diesel, natural gas, and electricity, have mitigated the impact of rising crude oil prices. He suggested that the central bank is likely to sustain its current monetary policy throughout both the second and third quarters. During the first quarter policymaking meeting in March, the central bank kept the discount rate steady at 2 percent, the highest in 15 years.

Lin further explained that the central bank must consider the consequences of higher interest rates on consumer consumption, especially as the current AI-driven economic growth has not significantly bolstered private consumption. He warned that any increase in interest rates could also impact the local property market, as home buyers would face higher mortgage rates.

Wu Meng-tao, an economist at the Taiwan Institute of Economic Research (TIER), mentioned that the market widely anticipates a 25 basis point increase in interest rates by the ECB in June due to mounting inflationary pressures. Wu observed that while the U.S. Fed has adopted hawkish rhetoric, it is unlikely to make any changes unless CPI growth exceeds 4 percent. In April, U.S. CPI rose by 3.8 percent compared to the previous year, marking the highest increase since May 2023.

Wu remarked that the local central bank appears passive and cautious, opting not to adjust its policies before other central banks. He suggested that more observation time is needed and did not rule out the possibility of the central bank maintaining steady interest rates through the end of the year.