Taiwan central bank will probably not cut rates before June, governor says

By Thomson Reuters Mar 13, 2024 | 11:19 PM

By Faith Hung

(Reuters) – Taiwan will probably not cut interest rates before June as it may be necessary to raise the 2024 inflation forecast in consideration of rising consumer prices, the central bank governor said on Thursday.

Taiwan’s consumer price index (CPI) rose 3.08%, a 19-month high, in February as food prices climbed during the Lunar New Year holiday, and is widely expected to remain high in the face of potential electricity price increases in April.

The potential price hikes could have “a chain reaction effect on inflation expectations”, Governor Yang Chin-Long told lawmakers in parliament on Thursday.

“If CPI remains above 2% for an extended period, inflation expectations would be high, making it hard to bring inflation down,” Yang said.

The bank will raise its CPI forecast this year above 2%, while aiming to keep CPI around 2% in the medium to long term.

At its last quarterly board meeting in December, the central bank unanimously decided to keep its policy rate unchanged at 1.875%, where it has stood since last March. The next rate-setting meeting is March 21.

The central bank now calculates that the island’s export-driven economy may meet the bank’s 3.12% forecast for this year more easily than originally expected, he said.

(Reporting by Faith Hung; Editing by William Mallard)