The central bank is expected to leave the benchmark discount rate unchanged at 1.125% on Thursday at its quarterly meeting, all 25 economists in a Reuters poll said, after holding fire at its past six meetings. It last cut the rate in March of 2020.
Taiwan's export-reliant economy has been supported by global demand for tech products from an increasing number of people working and studying from home during the COVID-19 pandemic, and has been further helped by a global recovery as major economies like the United State emerge from lockdown.
While growth slowed to 3.7% in the third quarter due to the impact of a short-lived spike in domestic COVID-19 cases, policymakers have been bullish that the economy will expand more than 6% for the full year of 2021.
While the consumer price index last month hit an eight-and-a-half year high of 2.84% year-on-year, it is likely to end the year at a lower point of about 2% and below recent inflation levels seen in the United States, said Kevin Wang, an economist at Taishin Securities Investment Advisory Co.
"For Taiwan, this is not very serious inflation," he added. "Although there are inflationary pressures, they are not such that the central bank has to act immediately."
Also, if Taiwan raised the benchmark rate ahead of the United States, it would cause the Taiwan dollar to further strengthen, Wang said, an area of persistent concern for the central bank due to fear of being labelled a currency manipulator by the United States.
Taiwan's manufacturers, including Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world's largest contract chip maker, are a key part of the global supply chain for technology giants such as Apple Inc.
The central bank will give its own revised forecast for economic growth this year on Thursday, having predicted a 5.75% expansion at its last quarterly meeting in September.
(Poll compiled by Carol Lee; Reporting by Liang-sa Loh and Ben Blanchard; Editing by Ana Nicolaci da Costa)
