Taiwan central bank raises growth outlook, flags inflation concerns

By Liang-sa Loh and Faith ‌Hung

TAIPEI, June 18 (Reuters) - ​Taiwan's central ​bank on Thursday raised its growth outlook for the year thanks to the AI boom, while keeping its policy interest rate steady as expected, though ‌the decision was not unanimous due to inflation concerns.

The central bank also ⁠said it needed to be a bit more hawkish.

The economy grew 8.68% in 2025 for the fastest rate ‌in 15 years, buoyed by ‌high demand from companies such as Nvidia for semiconductors used in artificial intelligence applications.

The bank raised its economic growth forecast to 9.45% from the March prediction of 7.25%.

The continued expansion ​of business opportunities from AI and other emerging technology applications is expected to drive steady export growth this year, Governor Yang Chin-long told reporters after a quarterly rate-setting ⁠meeting.

The central bank left the benchmark discount rate at 2%, in line with predictions from a Reuters poll in which ​27 out of 30 economists forecast no change.

Yang said two members of the bank's board cited the risk of inflation in not backing ​the decision to keep the rate steady.

"Basically, so ‌far, it is not yet time to raise interest rates; it still depends on the data," he added, however.

"Several board members reminded us ⁠that inflationary pressure needs to be closely monitored, so we need to be slightly more hawkish," Yang said.

The central bank lifted its consumer price index (CPI) forecast for this year to 1.91%, up from its ⁠March forecast of 1.8%.

Last month, inflation rose above the central bank's 2% "warning" line, hitting 2.2%, its highest ​level in more than a year, due to the impact of rising energy prices.

KGI Securities Investment Advisory Chairman Chu Yen-min said the central bank would probably take action only if inflation climbed to 3%.

"Therefore, ‌based on inflation conditions, Taiwan has not yet reached the point where an interest-rate hike is warranted," Chu said. Taiwan's rate decision came ‌after the U.S. Federal Reserve held its benchmark interest rate steady, though new quarterly projections showed officials ⁠expect a hike in borrowing costs ‌later this year on increasing ​inflation concerns.

(Reporting by Liang-sa Loh and Faith Hung; Additional reporting by Emily Chan; Writing by Ben Blanchard; Editing by Emelia Sithole-Matarise, Clarence Fernandez and ‌Thomas Derpinghaus)

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