Fri, Jun 20, 2025 page9

• Central bank keeps interest rates stable

  NOT JUSTIFIED: The bank’s governor said there would only be a rate cut if inflation falls below 1.5% and economic conditions deteriorate, which have not been detected

  • By Crystal Hsu / Staff reporter
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  The central bank yesterday kept its key interest rates unchanged for a fifth consecutive quarter, aligning with market expectations, while slightly lowering its inflation outlook amid signs of cooling price pressures.

  The move came after the US Federal Reserve held rates steady overnight, despite pressure from US President Donald Trump to cut borrowing costs.

  Central bank board members unanimously voted to maintain the discount rate at 2 percent, the secured loan rate at 2.375 percent and the overnight lending rate at 4.25 percent.

  

  Central bank Governor Yang Chin-long speaks at a news conference at the bank in Taipei yesterday.

  Photo: CNA

  “We consider the policy decision appropriate, although it suggests tightening leaning after factoring in slackening inflation and stable GDP growth,” central bank Governor Yang Chin-long (楊金龍) said.

  The central bank retained its full-year GDP growth forecast at 3.05 percent, citing stronger-than-expected economic performance so far this year, helped by keen demand for artificial intelligence hardware and front-loading by businesses to deal with potential US tariff hikes.

  However, the central bank is looking at a sharp economic slowdown moving forward, forecasting 0.78 percent GDP growth for the second half of the year, as momentum linked to front-loading is not sustainable, Yang said.

  Furthermore, the central bank lowered its projection for consumer price index (CPI) growth from 1.89 percent to 1.81 percent, he said, adding that core CPI, which excludes energy, vegetables, fruits and other volatile items, was estimated to be 1.69 percent.

  The predictions were lower than last year’s 2.18 percent and 1.88 percent respectively, the central bank said.

  “While inflation is mitigating, we have not seen a significant enough slowdown in the economy to justify a rate cut,” Yang said.

  A rate cut is only possible when inflation falls below 1.5 percent and economic conditions deteriorate — which have not yet been detected nor seen in the near future, the governor said.

  The central bank said service sector prices would continue their gradual easing trajectory and so would international crude oil prices, in light of the world’s escalating economic uncertainties and geopolitical tensions, Yang said.

  Yang refused to comment on whether the central bank would intervene to defend the NT$29.5 mark against the US dollar.

  “Maintaining market stability is the central bank’s responsibility, but it does not mean defending a specific exchange rate,” he said.

  The local currency appeared severely underestimated in the first quarter, and the present value better reflects Taiwan’s GDP showing, Yang said.

  The NT dollar closed at NT$29.621 to the greenback yesterday in Taipei trading, down NT$0.079 from the previous session, central bank data showed.

  As for the property market, the central bank did not introduce new mortgage curbs while refraining from loosening existing rules.

  Yang dismissed speculation over a new wave of credit tightening, saying: “That won’t happen.”

  Real-estate lending last month constituted 37.1 percent of total loans, a level that does not merit credit easing, although housing transactions slowed significantly, he said.
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