Taiwan's central bank maintained its interest rate for the seventh consecutive quarter at 1.375% as inflationary pressures and future inflation expectations remain manageable.
The board of the Central Bank of the Republic of China (Taiwan) decided to maintain the discount rate, the rate on accommodations with collateral and the rate on accommodations without collateral at 1.375%, 1.75%, and 3.625%, respectively.
The average annual growth rate for consumer price inflation, or CPI, was 1.54% in the first two months of 2018, mainly due to higher vegetable and cigarette prices. Core inflation, which excludes items subject to volatile swings, came in at an average annual growth rate of 1.61%, suggesting a moderate price uptrend. The monetary authority forecasts CPI and core CPI to grow at a pace of 1.27% and 1.26% year on year in 2018.
The central bank projects an increase in domestic prices in 2018, spurred by higher raw material prices and gains in minimum wage and public sector employee pay which could lead to wage increases for private sector workers. However, inflationary pressures remain subdued, and the outlook is stable due to a negative output gap.
Taiwan's economy is projected by to expand by annual rate of 2.58%, slightly down from 2.86% growth of the previous year, as the central bank expects exports to weaken in 2018.