TAIPEI (Taiwan News) — Taiwan’s Central Bank on Thursday left its key interest rate unchanged at 2% for the fifth consecutive time, in line with market expectations.
Interest rate adjustments are a core component of monetary policy. Raising rates can help contain inflation and curb excessive investment in assets such as real estate and equities, while lowering rates may stimulate domestic consumption and support exports during economic slowdowns.
The bank maintained its March forecast for 2025 GDP growth at 3.05%. However, it slightly revised its projection for the annual consumer price index growth from 1.89% to 1.81%, citing easing inflationary pressures, according to CNA.
The CPI tracks how the prices of a typical basket of goods and services change over time, according to Capital Futures. When the CPI rises, it indicates the general price level of consumer goods and services is increasing, signaling inflationary pressure, while a decline in the CPI suggests falling prices, which may point to deflation.
The core consumer price index for the year is forecast at 1.69%. Core CPI measures underlying inflation by excluding volatile items such as food and energy, offering a clearer view of long-term price trends, according to MacroMicro.
The Central Bank maintained existing credit controls on the real estate sector, which have been in place since September, without introducing new measures or relaxing restrictions.
Some property developers have recently urged the bank to relax these measures. Taishin Holdings Chief Economist Li Chen-yu (李鎮宇) described the situation as a delicate policy dilemma, noting that maintaining credit restrictions risks increasing bad debt, while loosening them too early could encourage speculation.
The discount rate, which is the interest rate charged to commercial banks for short-term loans, remained at 2%. The collateralized loan rate, applied to loans backed by collateral, stayed at 2.375%, and the short-term accommodation rate, reflecting the interest rate for short-term interbank lending, was held steady at 4.25%.
