The central bank of Taiwan is expected to keep its policy rate unchanged this week, according to economists polled by Reuters, as the island's economy and inflation slows and global banking woes are unnerved markets.
The central bank is likely to keep its benchmark discount rate at 1.75 per cent at its quarterly meeting on Thursday, according to the median forecast of 24 economists surveyed. The rate was raised by 12.5 basis points to its current level at the last meeting in December.
Eight of the economists said that the central bank would lift the rate by 12.5 per cent basis points to 1.875 per cent.
The median forecast was for the central bank to keep the rate at 1.75 per cent for all of 2023 and most of 2024, before cutting it to 1.625 per cent in the fourth quarter of next year.
The central bank said in December that it would end its hiking cycle as it expects the economy to decelerate and inflation to drop below 2 per cent this year.
In February, Taiwan's consumer price index was 2.43 per cent higher than a year ago, falling in line with economist expectations.
Cathay United Bank chief economist Lin Chi-chao said that Taiwan's rates were unlikely to rise because of expectations for a decline in inflation, a slowing domestic economy and a likely larger U.S. Federal Reserve rate this week, as well as the chaos that has erupted since Silicon Valley Bank failed.
Lin said that the central bank will consider the international economic and financial situation and will stand still.
Yen Tzung-ta, the deputy central bank governor, said on Monday that Taiwan's current inflation wave was not a short-term phenomenon, but noted in recent history that the bank had rarely raised interest rates during export downturns.
Taiwan's exports fell for a sixth consecutive month on an annual basis, to the lowest level in two years because of the deteriorating global economy, with the outlook remaining dim for at least the first half of the year.
Taiwan's statistics agency lowered its gross domestic product forecast for 2023 to 2.12 per cent, down from the 2.75 per cent prediction in November.
The central bank will give its revised forecast for 2023 GDP growth on Thursday. In December, it predicted a 2.53 per cent expansion, down from a previous prediction of 2.9 per cent.