Taiwan markets: Bucking global rate hikes
CBC on hold.
Group Research - Econs, Ma Tieying18 Sep 2026
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Taiwan’s central bank kept its policy rate unchanged at 2.00% at the September 17 policy meeting, in line with the DBS forecast. Three key reasons cited by the governor at the post-meeting press conference explain why the central bank bucked the global tightening trend and kept rates on hold. First, inflation remains relatively moderate, with the central bank forecasting CPI inflation at 2.0% in 2026 and 1.8% in 2027. Second, the central bank has relied on quantitative tools to contain liquidity expansion, with M2 growth (latest: 7.4% YoY) relatively contained compared with nominal GDP growth. Third, the economic recovery remains uneven, both between exports and domestic demand and between high-tech and traditional industries.

We maintain our view that the central bank will hike rates by 12.5bps to 2.125% at the December meeting. In our view, the central bank’s inflation outlook may be too sanguine. We expect CPI inflation to remain above 2% through the rest of this year and into 2027, reflecting prolonged energy and commodity price pressures amid persistent US-Iran tensions, as well as renewed weakness in Asian currencies against the USD following the Fed hike. Domestically, inflation expectations and wage growth also pose upside risks to demand-side inflation. More than 60% of respondents in a recent survey by a leading local academic research institute expect inflation to remain above 2% in 2027. Meanwhile, minimum wages are set to rise by around 5% in 2027 following the upcoming annual review.

Meanwhile, the central bank further eased housing credit controls, raising the LTV cap on second-home loans to 70% from 60%. The central bank cited improved real estate loan concentration (latest: 34.4%), continued weakness in property transactions, and softer expectations for housing price increases. The move brings the second-home LTV cap back to the 70% level seen in 2023, when the 70% limit was reintroduced as part of the latest round of housing market cooling measures. We do not expect the central bank to fully remove the LTV cap on second-home loans or raise the LTV caps on third/fourth homes and high-value homes in the near term, given the potential for these measures to reignite speculative demand.

Ma Tieying 馬鐵英, CFA

Senior Economist - Japan, South Korea, & Taiwan 經濟學家 - 日本, 南韓及台灣
[email protected]



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