Taiwan Dollar: CBC holds rates but flags inflation risks – Commerzbank

Commerzbank's analysts report that Taiwan's Central Bank of the Republic of China (CBC) maintained its policy rate at 2.0% for the 10th consecutive meeting, indicating a cautious approach. The bank has raised its 2026 inflation and GDP forecasts slightly, expecting strong growth from AI-related semiconductor demand, and suggests that policy could remain unchanged in December, but potentially begin tightening in Q1 2027 if inflationary pressures persist.

The CBC left the policy rate unchanged at 2.0% yesterday, aligning with expectations. The bank has now kept the policy rate steady for 10 consecutive meetings, suggesting the CBC sees no urgency to tighten monetary policy at present. The bias appears to be towards a wait-and-see stance for now. CBC expects headline inflation to ease from 2.0% to 1.8% in 2027, reflecting elevated global energy prices and persistent sticky services inflation.

The bank also raised its 2026 GDP growth forecast to 11.5% from 9.5%, supported by robust investment growth and strong AI-related semiconductor demand. Overall, the policy outlook seems closer to neutrality than an explicit tightening bias. Strong growth momentum will allow policymakers to focus on managing inflation risks should price pressures emerge in the months ahead.