- In the second quarter of 2026, Taiwan's central bank announced at its board meeting that it would keep the benchmark interest rate unchanged, with the rediscount rate remaining anchored at 2%, the highest level since 2008. This marks the ninth consecutive time the bank has held steady on policy rates, fully aligning with widespread market expectations.
- Given the continued strong performance in demand for artificial intelligence, officials have significantly raised the forecast for the full-year GDP growth rate in 2026 to 9.45%, while the forecast for real output growth has been increased to 20.05%, indicating robust growth momentum in the macroeconomic fundamentals.
- Despite the proportion of real estate loans to bank credit falling to 35.2% in May, within the target range, the central bank decided to maintain the current intensity of selective credit controls, primarily considering that the wealth effect of the securities market might trigger a reversal in the concentration of real estate credit after a cooling in Taiwan stock trading.
Interest Rates Frozen for Nine Consecutive Times, Maintaining Post-Financial Crisis Highs
Taiwan's central bank decided to keep the three major interest rates unchanged. Besides maintaining the rediscount rate at 2%, the secured loan rate and the short-term loan rate are also fixed at 2.375% and 4.25%, respectively. The head of the monetary policy authority, Yang Chin-long, clearly stated that the precondition for implementing preventive rate hikes is the sustained inflation expectation above the 2% threshold for the next six months. Although the overall CPI and core CPI in May reached 2.2% and 2.12%, respectively, due to short-term climate factors and geopolitical disturbances, the overall imported inflation pressure remains controllable as international geopolitical tensions ease following the US-Iran peace agreement. Officials predict that the full-year CPI and core CPI for 2026 will be adjusted to 1.91% and slightly above the March forecast level, with the overall inflation trajectory remaining in a moderate range.
AI Demand Exceeds Expectations, Driving Up Macroeconomic Outlook
Benefiting from the strong pull of the global artificial intelligence industry chain on Taiwan's semiconductor and technology hardware supply chain, the central bank has significantly revised its macroeconomic forecast upward. The GDP growth rate forecast for 2026 has been raised from 7.28% in March to 9.45%, and the capital formation growth rate forecast has also been increased from 5.87% to 6.71%. The prosperity of exports and external demand is simultaneously transmitting to the internal economy, driving private consumption and domestic demand performance beyond previous expectations, with its growth rate forecast being simultaneously raised to 3.43%. This supply-side recovery driven by the technological innovation cycle is gradually evolving into a comprehensive growth pattern driven by both external and internal demand.
Wealth Effect Spillover Risk Limits Credit Control Relaxation
In the highly watched area of real estate credit control, although the concentration of real estate loans fell from 35.42% to 35.2% in May, entering the ideal monitoring threshold set by the central bank of 35% to 36%, the decision-makers did not relax the policy as some in the market had expected. Central bank officials believe that the speed of decline in bank fund concentration is still relatively slow, and current overall housing prices remain at high levels. More critically, the significant rise in the securities market has brought about a strong wealth effect. Although since the implementation of the seventh wave of credit control, the stock market's upward trend and the cooling of the housing market transactions have shown a phase of divergence, historical experience indicates that the trading activity of the two is positively correlated. If Taiwan stock trading cools in the future, cash-out or hedging funds may flow back into the real estate market, leading to a reversal in credit concentration.
Structural Divergence in Credit Policy Triggers Housing Market Stratification
Under the current policy framework, due to the New Youth Housing Loan project not being subject to traditional selective credit controls, market credit funds are showing a highly concentrated trend. Data shows that the proportion of youth housing loans in new housing loans has soared to a historic high of 62%. Meanwhile, the total amount of new housing loans in April fell sharply to NT$53.3 billion, the lowest level for the same period since 2023. This distortion in the credit structure suggests that the real estate market will continue to experience severe stratification in the short term. Funds will continue to concentrate on high-quality projects with low total prices and small sizes favored by first-time buyers, while high-asset groups, constrained by credit controls, are more inclined to direct their marginal funds towards targets with high defensive attributes, such as the core areas of Taipei and New Taipei City.
