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Taiwan's central bank kept its key interest rates unchanged at a record low, as widely expected, on Thursday.
Policymakers decided to hold the benchmark rate at 1.125 percent.
Due to higher crude oil prices and low base period, inflation was higher in the first half of the 2021, the bank observed. But it is expected to slow down in the second half of the year.
Inflation forecast for this year was lifted to 1.6 percent from 1.07 percent. Core inflation is seen at 1.11 percent versus 0.77 percent estimated previously.
With the global recovery, Taiwan's exports and private investment are forecast to grow, the bank noted. If the domestic epidemic is controlled, private consumption will gradually stabilize.
The bank raised its growth projection for 2021 to 5.08 percent from 4.53 percent estimated previously.
With inflation relatively subdued and the currency at multi-year highs against the US dollar, Gareth Leather, an economist at Capital Economics, suspects that the central bank will be in little hurry to start tightening.
