Taiwan hikes rates in unpredicted move

Taiwan’s central bank raised its policy rate unexpectedly, citing concerns about inflation and anticipating electricity price hikes next month.

This move diverges from the global trend of central banks signalling lower interest rates due to weakening inflation.

The benchmark rate was increased to 2 per cent from 1.875 per cent, its first adjustment since March last year.

According to Reuters, this decision was not unanimous, with one board member voting against it.

Despite the hike, Taiwan’s rate remains lower compared to major economies, and further increases are not expected soon.

The central bank also revised its CPI forecast for the year to 2.16 per cent due to a recent surge in food prices during the Lunar New Year.

Analysts see the rate hike as a preemptive measure to curb inflation expectations before the impending electricity price increase. Taiwan’s economic growth forecast for 2024 was raised to 3.22 per cent, reflecting strong demand for Taiwanese tech products and domestic spending recovery.

Notably, this move contrasts with the US Federal Reserve’s decision to maintain rates, albeit with plans for future cuts.