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 rate has been on hold since an increase of 12.5 basis points last 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 December have shown steady inflation, when corrected for the impact of the timing of lunar new year holidays. PMI surveys have also shown modest expansion in the manufacturing sector in recent months.

In the statement accompanying today's decision, officials expressed concerns about the impact of trade tensions on external demand but noted that the outlook for domestic consumption remains solid, forecasting GDP growth of 3.05 percent this year. Officials are more confident about the inflation outlook, revising down their forecasts for headline and core inflation this year from 2.18 percent and 1.88 percent to 1.89 percent and 1.79 percent respectively.

Reflecting their forecasts now for growth to remain solid and inflation to moderate further in 2025, 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.