Apollo economist warns: AI bubble now bigger than 1990s tech mania
By Liang-sa Loh and Faith Hung
TAIPEI (Reuters) -Taiwan’s central bank kept its policy rate unchanged on Thursday, citing the island’s robust tech-driven economy and moderating inflation, while signalling there was no need for a rate cut this year.
Taiwan’s export-dependent economy has been performing well due to strong demand for artificial intelligence (AI) applications, the chips for which are largely made on the island, even as uncertainty over U.S. tariffs have clouded the outlook.
The central bank, in a unanimous decision and a move widely expected by economists, left the benchmark discount rate at 2%, where it has stood since March of last year, saying the economy was performing well and inflation was below its 2% warning line.
"If the economy is bad later on and if inflation drops significantly, then I think we will be in a better position to cut interest rates - but we have not seen that yet," Governor Yang Chin-long told reporters after the quarterly rate-setting meeting.
None of the central bank’s board members mentioned a preventative rate cut in the second half of the year, he added, describing the bank’s monetary policy tone as "neither very tight nor loose".
Taiwan’s rate decision came a day after the U.S. Federal Reserve held rates steady, as expected, and retained projections for two quarter-point rate cuts this year.
Taiwan’s central bank maintained its economic growth outlook for the year at 3.05% and trimmed its consumer price index (CPI) forecast for 2025 to 1.81%, down from its March forecast of 1.89%.
Taiwan’s economy grew 4.59% in 2024, buoyed by robust exports.
While economic performance remains solid, the central bank warned of uncertainties that could impact its outlook, including U.S. tariff policies, global monetary policy adjustments, a potential slowdown in China, and geopolitical conflicts.
The central bank has also been contending with strengthening of the Taiwan dollar fuelled by speculation Washington has pressured Taiwan to strengthen its currency as part of ongoing tariff discussions, a claim the government has denied.
Yang said pressure on the Taiwan dollar would ease if the uncertainty over the U.S. tariffs cleared up.
Taiwan, which had been facing a 32% tariff until U.S. President Donald Trump hit the pause button for 90 days in April, remains in talks with Washington over the issue.