DBS' Senior Economist Ma Tieying has revised her outlook for Taiwan's policy rate following an upgrade to the 2026 Gross Domestic Product (GDP) and Consumer Price Index (CPI) forecasts, now expecting GDP at 9.4% and CPI at 1.9% in 2026 [1]. Tieying anticipates 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]. According to DBS, recent data indicate that Taiwan's central bank is likely to keep rates unchanged at its June policy meeting, but tightening pressure is expected to build in the second half of the year due to rising pipeline inflation [1].
DBS highlights that headline CPI could rise above 2% from May onward and reach approximately 2.5% by mid-year, with some pass-through effects likely to push core CPI toward 2.5% in the second half [1]. The central bank remains vigilant against second-round inflation effects, particularly those stemming from higher energy costs [1].
While no immediate market reaction is discussed, the forecasted rate hike and inflationary pressures suggest a cautious outlook for monetary policy in Taiwan. DBS's analysis points to a mild tightening path, with the central bank expected to respond to persistent inflation risks in the coming months [1].
CONCLUSION
DBS expects Taiwan's central bank to maintain rates in June but sees a 12.5bps hike in the third quarter as inflation pressures mount. Upward revisions to GDP and CPI forecasts underscore a cautious tightening stance. The market takeaway is a moderate shift toward tighter monetary policy in response to rising inflation risks.