While the central bank has kept interest rates unchanged, minutes of the meeting last month reveal that policymakers are increasingly alert to the risk that external shocks could destabilize inflationary expectations even as current price pressures remain contained.
All board members agreed to maintain the benchmark rate, citing stable domestic inflation and resilient economic growth. However, the tone of the discussion pointed to a more forward-looking concern — not where inflation is now, but where people think it is headed.
The minutes highlighted close attention to oil prices, foreign exchange movements and the psychological transmission of inflation.
Photo: CNA
While geopolitical tensions in the Middle East have lifted global crude prices, policymakers said that Taiwan’s inflation remains under control, supported in part by government measures to stabilize energy costs and cushion imported price pressures.
That backdrop justifies keeping monetary policy on hold for now, they said.
However, several members said that inflation dynamics are increasingly driven by expectations rather than immediate price changes.
Even if headline consumer price growth continues to moderate, they said that persistent perceptions of rising prices could encourage firms to raise prices more aggressively, particularly in areas where costs are difficult to reverse once adjusted.
The central bank reiterated that oil shocks typically unfold in two stages: an initial supply-driven phase that does not require policy action and a second phase in which inflationary expectations become unanchored and might prompt monetary tightening.
Officials said Taiwan is currently in the first phase, helped by energy price stabilization policies.
Still, the minutes revealed unease about how quickly that balance could shift. Some policymakers warned that prolonged geopolitical tensions could keep oil prices elevated long enough to spill into broader inflation, while others flagged the risk that entrenched expectations could eventually dampen consumption and weigh on economic growth.
Foreign exchange trends also featured prominently, with a stronger US dollar and weaker New Taiwan dollar seen as additional sources of imported inflation.
On the domestic side, policymakers acknowledged that Taiwan’s expansion remains uneven, with growth heavily concentrated in artificial intelligence-related industries while other sectors lag.
Lower-income households are also facing higher inflation pressures than headline figures suggest, raising concerns over distributional impacts, they said.
While the policy stance remains unchanged, the minutes underscore a subtle shift in focus — stability today, but heightened sensitivity to how quickly external shocks could reshape inflationary expectations.
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