Taiwan hopes to attract tourists to travel and boost its economy.
Chenning.sung @ Taiwan | Time | Getty Images
Taiwan’s central bank surprised markets on Thursday by raising policy interest rates amid caution over persistent inflationary pressures amid expectations that electricity prices will rise next month.
The central bank raised its benchmark discount rate to 2% from 1.875% since March last year, citing concerns about the impact of rising electricity prices in April and continued inflation.
A Reuters poll showed that 25 out of 26 economists predicted the central bank would keep interest rates unchanged. The new interest rates remain at much lower levels relative to major economies.
Taiwan’s central bank raised its forecast for this year’s consumer price index (CPI) to 2.16% from the previous forecast of 1.89%.
Due to rising food prices during the Lunar New Year period, the island’s CPI rose 3.08% in February, hitting a 19-month high.
Taiwan’s government will announce on Friday how much electricity prices will rise.
Ahead of Taiwan’s unexpected rate hike, the Federal Reserve decided on Wednesday to keep interest rates unchanged but said it would stick to its plan to cut borrowing costs this year.
Taiwan’s central bank also raised its 2024 economic growth forecast to 3.22% from 3.12% in December due to global demand for Taiwan-made technology products and a rebound in domestic spending.
The economic growth rate in 2023 will be the slowest in 14 years.
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