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Taiwan’s central bank kept its policy rate unchanged at 2.00% at the March 19 meeting but signalled a tightening bias. The bank raised its 2026 GDP growth forecast to 7.3% (from 3.7%), driven by strong demand for AI and other emerging technologies, which continue to support exports and investment. At the same time, the CPI inflation forecast was revised slightly higher to 1.8% (from 1.6%), reflecting Middle East tensions and rising oil prices, alongside the government’s energy price stabilization measures.
The governor noted that pre-emptive tightening is not yet necessary but emphasized readiness to act if geopolitical tensions persist and second-round effects from higher oil prices begin to feed into inflation expectations. We maintain our base case that the policy rate will remain unchanged at 2.00% this year, while not ruling out one to two 12.5bp hikes, potentially starting as early as June.
On macroprudential policy, the central bank modestly relaxed credit controls for the first time since September 2024. The loan-to-value (LTV) ratio for second-home mortgages was increased to 60% (from 50%), while LTV ratios for third homes, fourth homes, and high-value properties remain capped at 30%. This adjustment reflects cooling property transactions, slower price appreciation, and improved bank exposure to real estate.
However, the governor emphasized that it is not yet time for a broader easing cycle, noting that real estate loan concentration remains elevated (36% in February). In our view, this move represents a targeted adjustment rather than the start of sustained easing.
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