DBS Group Research economist Ma Tieying has revised Taiwan’s policy rate outlook following an upgrade to the 2026 Gross Domestic Product (GDP) and Consumer Price Index (CPI) forecasts. The new projections anticipate a 12.5 basis point rate hike in the third quarter, which would raise the policy discount rate from 2.00% to 2.125% [1]. DBS expects the central bank to keep rates unchanged at the June policy meeting, citing recent data that indicate a wait-and-see approach in the near term [1].
The upward revision in forecasts includes a 2026 GDP growth rate of 9.4% and a CPI of 1.9% [1]. DBS notes that rising Producer Price Index (PPI) and Purchasing Managers' Index (PMI) price indices are signaling stronger inflation pressures, which are expected to intensify in the second half of the year [1]. According to DBS, headline CPI could surpass 2% from May onward and may reach approximately 2.5% by mid-year, with core CPI potentially also rising toward 2.5% in the second half [1].
The central bank is described as remaining vigilant against second-round inflation effects, particularly those stemming from higher energy costs [1]. DBS’s outlook suggests that tightening pressure is likely to build in the latter half of the year as pipeline inflation pressures continue to rise [1].
No immediate market reaction or analyst opinions beyond the DBS forecast are discussed in the article.
CONCLUSION
DBS anticipates a mild tightening path for Taiwan’s monetary policy, with a single rate hike expected in the third quarter as inflation pressures mount. The central bank is projected to remain on hold in June but may act later in the year if inflation continues to accelerate. Market participants should monitor inflation indicators and central bank communications for further guidance.