The Central Bank of the Republic of China (Taiwan) left its main policy rate unchanged at 2.00 percent at its quarterly policy meeting today, in line with the consensus forecast for no change. This follows an increase of 12.5 basis points at its previous meeting in March, which was the first increase in twelve months and took the rate to its highest level since 2008.

Data released since the CBC's previous policy meeting in March have shown low and relatively steady headline inflation after some holiday-related volatility early in the year. PMI surveys have also shown modest expansion in the manufacturing sector in April and May after an extended period of contraction.

In the statement accompanying today's decision, officials expressed confidence that external demand will continue to improve in the second half of the year, with domestic consumption and investment also expected to support stronger headline GDP growth. Officials revised up their annual GDP growth forecast for 2024 from 3.22 percent to 3.77 percent. Officials are also now more confident that price pressures will moderate in the near-term, revising down their forecast for annual headline inflation in 2024 from 2.49 percent to 2.12 percent and their forecast for annual core inflation from 2.58 percent to 2.00 percent.

Reflecting their forecasts now for growth to be stronger and inflation to moderate by more this year relative to their forecasts three months ago, officials concluded that current policy settings remain appropriate. Nevertheless, they also noted risks to the outlook and stressed that they are ready to adjust policy"in a timely manner as warranted", but provided little guidance on whether they see a rate increase or rate cut as more likely.

Taiwan’s central bank, the Central Bank of the Republic of China, announces its monetary policy with regard to interest rates four times a year. The announcement conveys to the financial markets and investors what, if any, changes in policy might be. The main focus is the target set for the discount rate.

The Central Bank of the Republic of China determines interest rate policy at four quarterly meetings during the year, with officials adjusting their main policy rate, the discount rate. A post-meeting statement is issued after each meeting, while the minutes of each meeting are published a few weeks later.

Monetary policy goals are to aid and abet solid economic growth along with rising living standards, and to keep inflation low, stable, and predictable. The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.