UPDATE 2-Taiwan central bank raises growth outlook on AI boom, stands pat on rates

Adds byline, rewrites with comments of central bank, analyst; paragraphs 4,6,7,9,10

By Liang-sa Loh and Faith Hung

- Taiwan's central bank raised on Thursday its growth outlook for the year as the tech-centred economy benefits from a boom in AI demand, while keeping the policy interest rate steady as expected, though not unanimously, due to inflation concerns.

The economy grew 8.68% in 2025 for the fastest rate in 15 years, buoyed by high demand from companies such as Nvidia NVDA.O for semiconductors used in artificial intelligence applications.

The bank raised its economic growth forecast to 9.45% from the March prediction of 7.25%.

The continued expansion of business opportunities from AI and other emerging technology applications is expected to drive steady export growth this year, Governor Yang Chin-long told reporters after a quarterly rate-setting meeting.

The central bank left the benchmark discount rate TWINTR=ECI at 2%, in line with predictions from a Reuters poll in which 27 out of 30 economists forecast no change.

Yang said two members of the bank's board cited the risk of inflation in not backing the decision to keep the rate steady.

"Basically, so far, it is not yet time to raise interest rates; it still depends on the data," he added, however.

The central bank also lifted its consumer price index (CPI) forecast for this year to 1.91%, up from its March forecast of 1.8%.

KGI Securities Investment Advisory Chairman Chu Yen-min said the central bank would probably take action only if inflation climbed to 3%.

"Therefore, based on inflation conditions, Taiwan has not yet reached the point where an interest-rate hike is warranted," Chu said.

Taiwan's rate decision came after the U.S. Federal Reserve held its benchmark interest rate steady, though new quarterly projections showed officials expect a hike in borrowing costs later this year on increasing inflation concerns.