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Taiwan Monetary Policy June 2021

Taiwan: Central Bank holds policy stable in June

At its monetary policy meeting on 17 June, the Board of Directors of Taiwan’s Central Bank (CBC) kept rates unchanged, with the discount rate set at the record low of 1.125%.

On one hand, strong domestic economic momentum so far this year, coupled with rising price pressures and recoveries abroad, meant that further stimulus was not warranted. However, the Central Bank judged it was premature to begin raising rates. Despite inflation reaching an over eight-year high in May, and the Bank upgrading its GDP and inflation forecasts for 2021, the recent domestic Covid-19 outbreak has increased risks to the outlook. Moreover, a rate hike would have risked adding further appreciatory pressure to the Taiwanese dollar.

Looking ahead, rates are likely to stay unchanged this year, although several panelists predict hikes from 2022 as the strong economy allows the Bank to withdraw some stimulus.

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