- The CBC also left its LTV restrictions on housing mortgage loans unchanged.
- The CBC reminded banks to strengthen risk management amid the expansion of stock-related credit.
- We continue to forecast a 12.5bp rate hike in 2H, but shift the expected timing to 4Q from 3Q.
- We also expect existing property-sector credit controls to remain in place.
- Policymakers may also seek to curb excessive leverage in equity markets.
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Taiwan's central bank kept its policy rate unchanged at 2.00% at the June 18 meeting, while maintaining a slightly hawkish bias. The CBC raised its 2026 GDP growth forecast to 9.45% (from 7.28%) and increased its CPI inflation forecast to 1.91% (from 1.80%). Governor Yang disclosed that 2 of the 15 board members voted for a rate hike at this meeting. However, he emphasized that pressure for a rate hike is not imminent, as inflation remains around 2%. The CBC will continue to monitor inflation developments in 2H and maintain a data-dependent policy approach.
The CBC also left its LTV restrictions on housing mortgage loans unchanged. The central bank noted that property transactions have cooled, house price appreciation has moderated, and banks' concentration in real estate lending has improved following the credit control measures introduced since August 2024. However, it also pointed out that outstanding real estate loan balances continue to rise, while the decline in the real estate loan concentration ratio partly reflects stronger growth in other lending categories, particularly credit related to stock market activities.
In addition, the CBC reminded banks to strengthen risk management amid the expansion of stock market-related credit. Against the backdrop of a strong equity market, there has been significant growth in both personal wealth-management revolving loans and banks' lending and investment financing to securities firms, futures companies, and financial support service providers.
We continue to forecast a 12.5bp rate hike in 2H, but shift the expected timing to 4Q from 3Q. The CBC appears comfortable with inflation around 2% and real interest rates near zero at present. A decisive rate hike would likely require CPI inflation to exceed 2.5% or remain above 2.0% for an extended period—such as six months—thereby influencing public inflation expectations. Given the recent decline in oil prices, the risk of CPI inflation exceeding 2.5% during Jun–Dec has diminished. However, the risk of inflation remaining above 2% throughout 2H remains intact.
We also expect existing property-sector credit controls to remain in place. The CBC is likely to remain cautious about broader asset price inflation pressures in 2H. Continued strength in the stock market could boost wealth effects, spill over into the property market, and eventually revive housing transactions and house price growth.
Policymakers may also seek to curb excessive leverage in equity markets through moral suasion, window guidance, and enhanced prudential examinations in 2H.
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Ma Tieying 馬鐵英, CFA
Senior Economist - Japan, South Korea, & Taiwan 經濟學家 - 日本, 南韓及台灣
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