TAIPEI (Reuters) – Taiwan’s central bank raised its benchmark interest rate on Thursday for the third time this year, reflecting persistent concerns about inflation, even as it cut its economic growth forecast for 2022.
The central bank raised the benchmark discount rate by 12.5 basis points to 1.625%, as expected.
Economists polled by Reuters had expected the central bank to raise the rate at its quarterly monetary policy meeting. The median forecast was for a rise of 12.5 basis points, but a minority expected an increase of 25 basis points and one saw a rise of 50 basis points.
The decision came after the US Federal Reserve raised interest rates for the third time in a row by 75 basis points on Wednesday and signaled further hikes in upcoming meetings, underlining its determination not to be complacent in its battle to contain inflation.
Taiwan’s central bank has repeatedly said that it will tighten monetary policy this year, as do its peers elsewhere, and that it regards inflation as a key criterion for interest rate movements.
The central bank said it expects the CPI to rise by 2.95% in 2022, slightly revising expectations from the 2.83% forecast in June.
But inflation, unprecedented in the United States or Europe, is declining.
Taiwan’s CPI rose 2.66% in August from a year earlier, the lowest reading in half a year.
The trade-dependent economy is also losing momentum as consumer demand increases in key markets in China, the United States and Europe. Taiwan’s exports last month only rose 2% year over year and may get worse as the year progresses.
The central bank again lowered its 2022 estimate for GDP growth to 3.51% from 3.75% in June. For 2023, it forecast GDP growth of 2.9%. The economy grew 3.05% in the second quarter of the previous year.