On March 19, Taiwan’s central bank held its joint board of directors and supervisors meeting, resolving to keep the rediscount rate unchanged at 2%. While the move appears to extend its steady policy stance on the surface, the materials released after the meeting revealed a more nuanced policy message.
Ming-Hui Liao, Assistant Research Fellow at the International Economic Research Division of the Chung-Hua Institution for Economic Research (CIER), noted that the central bank’s upward revision of its 2026 GDP growth forecast to 7.28% reflects how AI-related demand is driving simultaneous gains in exports, investment, and domestic demand. The bank also slightly raised its inflation forecast to 1.8%, still within a moderate range. With inflation pressures stemming mainly from international oil prices and supply-chain uncertainty, the board unanimously decided to keep rates on hold while making a modest adjustment to mortgage policy, raising the loan-to-value ratio on mortgages for a second owner-occupied home to 60% from 50%. The move signals a policy shift toward balancing both livelihood concerns and market structure considerations.
The central bank specifically cautioned that global political and economic uncertainties are intensifying. Even where certain U.S. tariff legal authorities face constraints, Washington retains the ability to adjust trade policy through instruments such as Section 232 and Section 301 investigations. Taiwan’s average tariff rate on exports to the U.S. has already fallen to 13.3%, giving it a relative advantage—largely because information and communications technology products and electronic components are broadly exempt. Nevertheless, traditional industries and small and medium-sized enterprises continue to face pressure. How these sectors can maintain competitiveness under the new tariff framework demands policy support to stabilize employment and preserve the industrial structure.
AI Supply-Chain Opportunities Come With Risks as Structural Weaknesses Persist
Liao pointed out that while Taiwan holds clear advantages in chips and server supply chains, it remains deficient in energy infrastructure, AI model development, and application-layer capabilities. Meanwhile, the “perpetual motion machine” pattern of cross-investment and reciprocal procurement among major AI players—though capable of amplifying growth momentum—may also accumulate bubble risks and financial vulnerabilities. Compounding these concerns, the U.S. push to establish a legislative framework for AI regulation could shape the pace of future global industry development.
High Growth Does Not Mean High Security; Policies Must Be Preemptive
Overall, the significance of the latest central-bank decision lies not simply in holding rates steady, but in the risk signals it sent. Despite Taiwan’s strong growth momentum, the island still needs to strengthen key areas, including energy security, technological innovation, and financial oversight. In Liao’s view, the government should adopt a more forward-looking approach to industrial and energy strategy to prevent structural weaknesses from being magnified over the business cycle. Only then can current growth be converted into a foundation for long-term, stable development.
Source: Ming-Hui Liao (March 26, 2026). Taiwan’s Strong GDP Growth and the Risks of the AI “Perpetual Motion Machine” China Times. https://www.chinatimes.com/opinion/20260326000057-262110