(Sept 17): Taiwan held its benchmark rate for the 10th consecutive quarter, the longest stretch since 2019, as consumer inflation slows even with the economy soaring on artificial intelligence.

The policy rate will stay at 2%, the monetary authority in Taipei said in a statement on Thursday after its quarterly meeting. Some 21 of 28 economists surveyed by Bloomberg News predicted the hold.

The central bank also predicted the consumer price index would wind up at 2.03% for the year — just above its 2% alert level and up from its previous call of 1.91%.

While Taiwan’s economy has been skyrocketing — it clocked the fastest first-half growth since 1976 on demand for its high-end tech exports like semiconductors — the consumer price index for August was well short of expectations. Power costs in Taiwan have been held in check somewhat because the government has been giving state-owned energy firms subsidies to offset rising costs due to the fighting in the Middle East.

The US Federal Reserve likely gave Taiwan a reason to boost its policy rate soon. A quarter percentage point hike by the Fed on Wednesday — the first since 2023 — could spur the central bank to do the same eventually because any widening of the rate gap with the US spurs capital outflows.

Lenders in Taiwan will welcome a hold by the central bank. Liquidity in the banking system has been tight this summer and a lower rate would allow them cheap access to funding.

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