Taiwan: Mild tightening path revised – DBS

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.)