Taiwan to hold rates steady despite weak exports as inflationary pressure eases

We have talked a lot about the political situation regarding Taiwan but it is worth noting that the economic situation in Taiwan is also worth mentioning because of the fact that all of this geopolitical situations in and around Taiwan will affect its economic situation in the world economy as well. You must be aware that Taiwan’s semiconductor manufacturing business has a huge influence on its GDP and it is worth mentioning that the exports from Taiwan still remain weak. However, it is still reported that the Taiwanese Central Bank will keep the rates steady as of now.

This is after most economists from Taiwan, who were polled by the Reuters, voted that the bank will keep the rates steady. The Central Bank of Taiwan is expected to keep the benchmark discount rate at 1.875% according to 19 out of the 23 economists surveyed in this poll but 4 of them said that the bank will increase the discount rate by 12.5 basis points to 2.0%. Analyst Chengyu Liu of First Capital Management said, “CPI year-on-year growth for May was significantly lower than market expectations. This may result in a 50/50 chance the central bank will decide to pause interest rate hikes in June.”

The economists also mentioned that the bank’s decision to hold rates steady or increase them will also depend on the US’ Federal Reserve who are also set to be meeting this week to decide their rates. They said that if the US Fed increases the rates then Taiwan will have to increase them as well. As per a report, “Taiwan’s exports in May fell on an annual basis for a ninth consecutive month in a symptom of anaemic demand for the island’s tech products from China and global markets, with matters not expected to improve until the third quarter”.

It is worth noting that Taiwan’s economy already entered recession in the first quarter of this year thanks to a weak demand due to the global economic slowdown and also the war between Ukraine and Russia which has been going on since well over a year now. Taiwan’s Central Bank will also revise their GDP growth forecast for this year during their meeting.