On September 18, Taiwan’s central bank opted to keep its benchmark interest rate unchanged at 2.00% in September, signalling little urgency to join other Asian economies in easing monetary policy.

The decision, which was unanimous, had been anticipated by most of the 32 economists surveyed by LSEG ahead of the announcement Capital Economics said in a note. Only two had projected a quarter-point reduction of 0.125 percentage points.

Officials at the Central Bank of the Republic of China (CBC) cited robust economic performance and subdued price pressures as reasons to hold steady. Output surged by 3.1% quarter-on-quarter in the second quarter, pushing annual growth to 8.0%. The upturn was fuelled largely by a surge in exports linked to artificial intelligence demand and some tariff-related front-loading, more than offsetting weaker household consumption.

Reflecting the stronger-than-expected momentum, the CBC upgraded its full-year growth forecast from 3.1% to 4.6%. Policymakers also suggested that domestic demand should strengthen in the months ahead, underpinned by rising real wages and corporate investment in AI-related capacity – an increasingly important industry on the self-governing island, even while Beijing almost daily speaks of reunification by force at some point in the future.

Inflationary pressures, however, remain muted Capital Economics added. Headline consumer prices rose 1.6% year-on-year in August, and are expected to hover near 2% over the forecast horizon. Such levels fall comfortably within the bank’s tolerance range.

Currency movements have also eased concerns about external competitiveness. After strengthening to TWD28.9 against the US dollar in early July, the Taiwanese dollar has since softened to TWD30.1 and is forecast to slip further to 31 by the end of the year. The depreciation lessens any pressure for immediate policy adjustments.