On June 18 in Taipei, Taiwan’s central bank raised its outlook for economic expansion this year, attributing the upgrade to elevated demand associated with artificial intelligence applications, while keeping its policy benchmark unchanged at 2%.
Governor Yang Chin-long said the central bank increased its full-year GDP forecast to 9.45% from the March projection of 7.25%, reflecting continued strength in exports and business opportunities linked to AI and other emerging technologies. The governor highlighted that the economy expanded by 8.68% in 2025, marking the fastest growth in 15 years, driven in part by large orders from companies such as Nvidia for semiconductors used in AI systems.
In a quarterly rate-setting meeting the bank left the discount rate at 2%, a move anticipated by a Reuters poll in which 27 of 30 economists expected no change. Yang said the board’s decision was not unanimous: two members did not support holding the rate steady, citing the risk of higher inflation.
Governor Yang reiterated that policy decisions will remain data-dependent, saying, "Basically, so far, it is not yet time to raise interest rates; it still depends on the data." He also relayed other board members' cautions: "Several board members reminded us that inflationary pressure needs to be closely monitored, so we need to be slightly more hawkish."
The central bank raised its consumer price index forecast for the year to 1.91% from the March estimate of 1.8%. Recent data showed inflation climbed above the institution's 2% "warning" line last month, reaching 2.2% - the highest rate in more than a year - a rise the bank attributed to higher energy prices.
Commenting on the inflation outlook, KGI Securities Investment Advisory Chairman Chu Yen-min said the central bank would likely only respond with a rate increase if inflation rose to 3%. "Therefore, based on inflation conditions, Taiwan has not yet reached the point where an interest-rate hike is warranted," Chu said.
Taiwan’s decision came after the U.S. Federal Reserve held its benchmark rate steady, though Fed officials' new quarterly projections signalled expectations for a possible hike later in the year as inflation concerns rise.
Yang pointed to AI-related semiconductor demand as a key driver of export strength this year and the principal factor behind the upward revision to growth expectations. The bank indicated that the expansion of commercial opportunities from AI and other technology applications should support steady export growth over the coming months.
While the central bank upgraded growth projections and marginally raised its CPI forecast, officials underscored that evolving inflation dynamics will determine the timing and extent of any future tightening. The split vote highlights the balancing act between supporting continued expansion driven by AI-related semiconductor demand and the need to guard against mounting inflationary pressures, particularly from energy.
The bank's stance leaves monetary policy on hold for now but signals a readiness to act should consumer prices continue to accelerate toward levels that would prompt further tightening.