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September 30: Taiwan Announces Interest Rate Decision

By Adam Wolfe

Although Taiwan’s economic recovery appears to be faltering somewhat, the central bank should continue its gradual interest rate normalization process at its Q3 monetary policy meeting. We expect the meeting—like the one in June—to result in a 12.5-basis-point (bp) increase in the discount rate, to 1.5%. There is little reason to believe the bank will be more hawkish as inflationary pressures remain muted and IP growth has been nearly flat on a sequential basis for several months. Still, better-than-expected export orders in August and declining unemployment should spur the central bank to continue along its current tightening path, and we expect the Q4 meeting to bring another 12.5-bp hike. See this RGE Critical Issue for more on Taiwan’s monetary policy.

Figure 1: Taiwan Slowly Returning to Normal

Source: Bloomberg    

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