Taiwan's Central Bank to Hike Discount Rate Following US Interest Rate Increase

Strategic Insights -

Taipei's economic landscape is set for a shift as Taiwan's Central Bank of China is poised to raise the discount rate, likely by half of a quarter percentage point to 2.5%, in response to the US Federal Reserve's 16th consecutive interest rate hike in two years. The decision will be influenced by upcoming economic indexes and consumer prices, with financial experts cautioning that inflation risks persist. Meanwhile, Central Bank Governor Fai-Nan Perng has emphasized the need for Taiwan's monetary policy to return to a neutral position, citing the country's relatively low consumer prices compared to the US.

Key Takeaways:

  • The Taiwan Central Bank is likely to raise the discount rate by half of a quarter percentage point to 2.5% in June, following the US Federal Reserve's 16th consecutive interest rate hike in two years.
  • The decision will be influenced by upcoming economic indexes and consumer prices, with inflation risks still existing.
  • Central Bank Governor Fai-Nan Perng has stated that the monetary policy of Taiwan should return to the neutral position, citing the country's relatively low consumer prices compared to the US.
  • The US Federal Reserve raised its short-term rate to 5% and hinted at further rate hikes, with some executives in the financial industry predicting that the Fed could raise its interest rate again in the near future.
  • Taiwan's central bank is set to follow the Fed's move in June to keep inflation at bay.
  • The Central Bank of China is planning to hold a board members' meeting in June to review the current monetary policy regarding the discount rate.

Statistics:

  • 16th consecutive interest rate hike in two years by the US Federal Reserve.
  • 5% short-term interest rate set by the US Federal Reserve.
  • Likely half of a quarter percentage point discount rate hike by the Taiwan's Central Bank of China in June.
  • 2.5% current discount rate of Taiwan's Central Bank of China.
  • Consumer prices in Taiwan are lower than in the US, according to Central Bank Governor Fai-Nan Perng.

Sources:

  • "Taipei, May 12 Asia Pulse",
  • "CNA"