Taiwan: Mild tightening path revised – DBS

FXStreet Insights Team FXStreet

DBS' Senior Economist Ma Tieying revises her Taiwan policy rate outlook after upgrading 2026 Gross Domestic Product (GDP) and Consumer Price Index (CPI) forecasts. She now expects a 12.5bps hike in 3Q, taking the policy discount rate from 2.00% to 2.125%. Tieying notes the central bank is likely on hold in June but sees rising pipeline inflation and second-round risks in 2H.

DBS flags 3Q rate hike risk

"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."

"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."

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

"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.)

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FXStreet Insights Team

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