Commerzbank’s Charlie Lay and Henry Hao report that Taiwan’s CBC kept its policy rate at 2.0% for a tenth straight meeting, signalling a patient stance. The bank slightly raised its 2026 inflation and GDP forecasts, sees strong growth from AI-related semiconductor demand, and suggests policy could stay unchanged in December but start hiking in Q1 2027 if price pressures persist.

Neutral stance with upside risks

“The Central Bank of the Republic of China (CBC) left its policy rate unchanged at 2.0% yesterday, in line with market expectations. The CBC, which meets quarterly, has now kept the policy rate unchanged for 10 consecutive meetings.”

“His comments suggest the CBC sees little urgency to tighten at present, judging the current policy stance sufficiently restrictive to contain inflation. The bias appears firmly towards maintaining a wait-and-see stance for now.”

“CBC slightly raised its headline inflation forecast for 2026 to 2.0% from 1.9% previously, reflecting expectations that global energy prices remain elevated and services inflation stays sticky. CBC expects inflation to ease in 2027 to 1.8%.”

“The CBC also raised its 2026 GDP growth forecast to 11.5% from 9.5%. The economy expanded 14.2% in H1, supported by strong AI-related demand for semiconductors and robust investment growth.”

“Overall, the policy outlook appears closer to neutral than to an explicit tightening bias. Strong growth momentum should allow policymakers to focus on inflation risks if price pressures pick up in the months ahead.”