Central Bank leaves rates unchanged in September

Latest bank decision: At its meeting on 19 September, Taiwan’s Central Bank decided to keep the discount rate unchanged at 2.00%.

Housing concerns dissuade any rate changes: The decision not to hike policy rates further was driven by moderate headline and core inflation: in August, the former was slightly above 2.0% and the latter somewhat below. On the flipside, rate cuts were premature given solid economic growth and a hot property market. Regarding the latter, the Central Bank continued to increase reserve requirements and loan-to-value limits for homebuying in a bid to contain excessive credit flows into the real estate market.

Little to no easing foreseen in the near term: The Central Bank provided no explicit forward guidance on the future direction of interest rates. Most panelists expect interest rates to end this year at their current level, though a few see a rate cut in December. For next year, a small majority expect rate cuts, with the rest seeing the Bank on hold. In any case, monetary easing will likely be gradual going forward, due to the Bank’s desire to tame the housing market.

Panelist insight: On the outlook, Nomura analysts said: “We expect the CBC to remain on hold throughout 2025, a decoupling from the global easing cycle, as the solid growth outlook and the housing market boom will support the CBC’s hawkish stance on monetary policy. We expect no further hikes in the RRR, as the CBC will likely wait until today’s tighter macroprudential measures take effect in the housing market.” Goldman Sachs analysts are more dovish: “Overall, we continue to expect the CBC could deliver its first rate cut at the December meeting, given progress in disinflation and a host of new prudential measures on bank loans and property markets.”

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