Taiwan's central bank is seeing increased pressure to raise interest rates at its upcoming quarterly policy meeting this week in light of domestic inflation exceeding the 2% alert level for what is a fourth straight month, Focus Taiwan reported on September 12. Economists said rate increases by several major central banks abroad have added to the case for tightening.

The bank has held its discount rate at 2.0% for nine consecutive quarters, most recently at its March meeting. Governor Yang Chin-long said afterwards that the board had maintained a somewhat hawkish stance, with two directors backing a hike.

Cathay United Bank chief economist Lin Chi-chao told CNA earlier this week that the central bank had forecast in June that Taiwan's consumer price index would rise by less than 2% in 2026. That picture has changed as international crude oil prices climbed amid escalating tensions in the Middle East, he said.

"Inflationary pressure has been on the rise," Lin is reported as saying, citing an August forecast from the Directorate General of Budget, Accounting and Statistics that Taiwan's CPI would increase 2.07% in 2026.

Lin said the central bank must also weigh decisions by its peers. The Bank of Korea lifted its benchmark rate from 2.50% to 3.00% with back-to-back increases in July and August, while the European Central Bank raised its key rates by 25 basis points in its second hike of the year. The probability of a US Federal Reserve increase next week has risen to nearly 90% after August CPI data showed persistent price pressure, and a Bank of Japan move is also likely, he said.

"Whether considering domestic conditions or the international situation, the interest rate hike checklist has been fully checked," Lin said.

With Taiwan's economy forecast to grow more than 11% in 2026, it should be able to absorb a rate rise, he added.