Taiwan: Mild tightening path in 2H – DBS

DBS Group Research economist Ma Tieying revises Taiwan’s policy rate outlook after upgrading 2026 Gross Domestic Product (GDP) and Consumer Price Index (CPI) forecasts. The team now expects an additional 12.5 bps hike in 3Q, taking the policy discount rate to 2.125%. Tieying sees the central bank on hold in June, with rising Producer Price Index (PPI) and Purchasing Managers' Index (PMI) price indices pointing to stronger inflation pressures later in 2026.

DBS adds 3Q rate hike for Taiwan

"Following our earlier upward revision of 2026 GDP and CPI forecasts (to 9.4% and 1.9%, respectively), we also revise our interest rate forecast, adding one 12.5bps rate hike in 3Q, which would lift the policy discount rate from 2.00% to 2.125%. Recent data suggest that the central bank is likely to remain on hold at the June policy meeting."

"Looking ahead, however, tightening pressure is likely to build in 2H as pipeline inflation pressures continue to rise."

"These leading indicators suggest that headline CPI could rise above 2% from May onward and reach around 2.5% by mid-year."

"Some pass-through into core inflation is also likely, potentially pushing core CPI toward 2.5% in 2H."

"Taiwan’s central bank remains vigilant against second-round inflation effects stemming from higher energy costs."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)