Taiwan’s central bank, the Central Bank of the Republic of China (CBC), maintained the rediscount rate, secured loan facility rate, and short-term accommodation rate at 1.875%, 2.25%, and 4.125% per annum, respectively, at its June 2023 meeting. This decision aligns with market expectations and marks a pause in the year-long tightening cycle. The current monetary policy stance reflects the committee’s assessment of inflation and economic prospects, as well as a review of the cumulative impact of monetary tightening on the economy. Meanwhile, Taiwan’s overall inflation rate eased to 2.02% in May, the lowest level in nearly two years. However, the CBC raised its inflation forecast for 2023 to 2.24%, higher than the previous projection of 2.09%, and lowered its economic growth forecast to 1.72%, down from the previous 2.21%.
Key highlights:
- International economic and financial conditions:
• Weak global end-demand and sluggish manufacturing sector, but the services sector showing signs of recovery.
• Global inflation slowing down gradually, but uncertainty factors remain.
- Domestic economic and financial conditions:
• GDP growth rate for Q1 declined to -2.87%, with an increased contraction in exports and negative growth in private investment.
• Economic growth is expected to rebound in the second half of the year, with a projected annual growth rate of 1.72%.
• Consumer Price Index (CPI) year-on-year growth rate slowing down, but high prices are observed in the services sector.
• Expected gradual decline in inflation rate in the second half of the year, with annual CPI and core CPI forecasted at 2.24% and 2.38% respectively.
- Policy interest rates and credit control measures:
• Maintaining policy interest rates unchanged to evaluate the effectiveness of monetary tightening.
• Amended selective credit control measures to limit the maximum loan-to-value ratio for second-home mortgages in specific regions to 70% for natural persons.
