Taiwan Raised Interest Rate in a Surprise Move to 1.875 percent, Highest Since 2015

Taiwan’s central bank, Central Bank of the Republic of China (Taiwan) unanimously raised the policy benchmark discount rate to 1.875% from 1.75%, in a surprise move and pushed borrowing costs to the highest since 2015 at its March meeting. It was the fifth hike since it began the current round of tightening in March last year. The central bank Governor Yang Chin-long said that the rate hike was due to inflation. He has said previously if it’s certain that the inflation rate is below 2%, the bank will stop raising interest rates, although there is still a lot of uncertainty.

Central Bank of Taiwan

When asked if this would be the last rate rise this year, Yang said: “The uncertainty is very big, particularly the confidence and contagion effect on the public from the U.S. regional banks.”

“At the meeting today, the Board decided to raise the discount rate, the rate on refinancing of secured loans, and the rate on temporary accommodations by 0.125 percentage points each to 1.75%, 2.125%, and 4%, respectively, effective December 16, 2022.

Taiwan benchmark interest rate

Taiwan’s trade-dependent economy is rapidly losing momentum as consumer demand wavers in major markets China, the United States and Europe, and as global inflation, rate rises and geopolitical pressures add more strains on business activity. Taiwan’s February exports fell annually for a sixth straight month to their lowest in two years. GDP shrank 0.41% in the fourth quarter of last year.


The central bank raised its consumer price index forecast for this year to 2.09% from a December prediction of 1.88%, it again cut its 2023 estimate for economic growth to 2.21% from its previous forecast of 2.53%.

The central bank said in a statement after the meeting that a rise in domestic food and electricity prices were pushing up inflation, but that it expected a gradual overall easing this year.

Taiwan CPI Inflation Rate
  • The annual inflation rate in Taiwan eased to 2.43% in February 2023, from 3.04% in the previous month and below market forecasts of 2.69% increase.
  • Prices advanced at a slower pace for education & entertainment (2.11% vs 4.49% in January), food (4.29% vs 5.27%), miscellaneous goods (2.05% vs 2.58%), transportation & communication (0.56% vs 1.14%) and housing (2.45% vs 2.49%).
  • Costs increased for clothing (1.32% vs 0.98%) and health (1.89% vs 1.65%). On a seasonally adjusted monthly basis, consumer prices went up by 0.17%, after a 0.39% rise in January.

Foreign Exchange

The Bank said; The NT dollar exchange rate is in principle determined by market forces. Nonetheless, when seasonal or irregular factors (such as massive inflows or outflows of short-term capital) lead to excess volatility and disorderly movements in the NT dollar exchange rate with adverse implications for economic and financial stability, the Bank, in line with its statutory mandates, will step in to maintain an orderly market.

Source: Taiwan Central Bank

From The Traders Community Research Desk