MNI BRIEF: Taiwan's CBC Hikes Policy Rate 12.5bp to 1.875%
Taiwan's central bank surprised markets by raising its key policy rate 12.5bp to 1.875% on Thursday, and lowered its growth forecast for 2023 due to weak exports and investment, according to a statement from the Central Bank of the Republic of China.
Rates were expected to be held steady but the fifth consecutive hike since February 2022 came as the CBC's board warned inflationary pressures in major economies remained high and there was the risk this could feed into inflation expectations. The annual growth rate of CPI in 2023 was raised to 2.09%, up from 1.88% estimated in December.
The forecast for growth in 2023 was lowered to 2.21% from December's estimate of 2.53%, although a steady rebound in private consumption and exports was expected in H2. Taiwan's exports declined 17.1% y/y in February, a sixth successive month of contraction, but a slight improvement on January's 21.2% y/y decline, data from the Ministry of Finance showed. (See MNI BRIEF: Taiwan Exports Fall Again In February)
The bank said it would maintain order in the foreign exchange market should there be any irregular capital flows.