Taiwan central bank holds rates, flags tightening stance (updated)

Taiwan Semiconductor Manufacturing

17/09/2026 10:09

Taiwan c.bank keeps benchmark interest rate at 2%, as expected
Taiwan c.bank raises 2026 GDP forecast to 11.48%
Rate decision follows Federal Reserve hike the previous day
Adds details from governor, paragraphs 6, 7, economist comments, paragraphs 9 and 13
By Liang-sa Loh and Faith Hung
TAIPEI, Sept 17 (Reuters) - Taiwan's central bank kept its policy interest rate on hold on Thursday, as expected, given the strong performance of the tech-focused economy and relatively mild inflation, but flagged it was moving in a tightening direction.
The decision to leave the benchmark discount rate TWINTR=ECI at 2%, as predicted by economists, bucks the previous day's move by the US Federal Reserve to raise interest rates by 25 basis points, underscoring Taipei's confidence in fighting inflation.
Taiwan enjoys an unusual position among advanced economies as strong semiconductor-driven growth is keeping its export engine humming, reducing pressure on policymakers to support the economy from geopolitical tensions and inflation.
"Our monetary policy stance does not follow other countries; we go our own way," Governor Yang Chin-long told reporters following the central bank's quarterly rate-setting meeting.
"Over the long term, Taiwan's inflation has been relatively mild compared to major economies," he said. "Even though we haven't raised interest rates, our monetary operations are still moving toward tightening."
Two board members dissented on the decision to keep rates unchanged, expressing concern about inflation, Yang added.
"Should inflation keep rising next year, the central bank will take action," he said. The central bank has around a dozen board members.
While the central bank slightly raised its consumer price index (CPI) forecast for this year to 2.03%, up from its June forecast of 1.91%, it expects inflation to slow to 1.83% next year.
"Unless there are unexpected inflation pressures, there is no need for rate hikes," said President Capital Management Chief Economist Lu Cheng-tao.
The economy has boomed due to robust global demand for semiconductors made by companies, including Taiwan Semiconductor Manufacturing Co 2330.TW, used in AI applications from companies such as Nvidia NVDA.O.
The central bank raised its 2026 economic growth forecast to 11.48% from the previous prediction of 9.45% given in June. For next year, it forecast the economy will slow to an expansion of 5.82%.
Taiwan's economy grew 8.68% in 2025, its fastest rate in 15 years.
Economists at Capital Economics said in a note that given subdued price pressures and solid economic growth, the central bank was expected to leave interest rates on hold at 2% for the foreseeable future.

 (Reporting by Liang-sa Loh and Faith Hung; Additional reporting by Roger Tung; Writing by Ben Blanchard; Editing by Jacqueline Wong)
 ((ben.blanchard@thomsonreuters.com;))