Two members of the central bank’s board of directors argued for an interest-rate increase at the bank’s policy meeting last month, citing persistent inflation risks even as most policymakers said that artificial intelligence (AI)-driven economic growth did not yet warrant tighter monetary policy, minutes released yesterday by the central bank showed.

The majority of the directors viewed inflation pressures as manageable, pointing to government measures to stabilize domestic prices and arguing that Taiwan’s strong economic expansion has been concentrated largely in AI-related industries, while traditional sectors and domestic demand have yet to fully recover, the minutes showed.

Most believed that keeping the policy rate unchanged would preserve flexibility to respond to uncertainties including changes in global economic conditions, geopolitical risks, oil prices and weather-related supply disruptions, they showed.

Several stressed that although inflation risks remained, recent price increases were driven mainly by supply-side factors, limiting the effectiveness of monetary tightening in addressing those pressures.

However, two directors dissented, saying that inflation had become persistent enough to justify a rate increase.

One said consumer prices had exceeded 2 percent in May and last month, while underlying inflation indicators had also increased.

Given the lag in monetary policy transmission, an earlier rate hike would help anchor inflation expectations, they said.

Another dissenting member pointed to the central bank’s own forecasts showing inflation likely remaining above 2 percent this year, as well as rising producer prices and elevated oil costs, as evidence that price pressures could persist.

They added that negative real interest rates on one-year time deposits suggested monetary policy had become overly accommodative.

The minutes showed that members were concerned about Taiwan’s uneven economic recovery, with several saying that the AI boom has fueled exceptional export growth, but the benefits have been concentrated in technology companies, while traditional industries and lower-income groups have seen limited gains.

Under such conditions, raising rates could place a disproportionate burden on households and businesses that have yet to benefit from the AI-led expansion, they said.

At the same time, all board directors agreed that the central bank should continue monitoring inflation expectations and clearly communicate its commitment to price stability, particularly as government price controls are temporary measures and market forces will eventually determine future price trends, the minutes showed.

They also agreed to maintain selective housing credit controls, as slower transactions and price consolidation indicated that the measures were working, but they flagged risks from a surge in stock-market-related borrowing and possible shifts in capital flows between equities and real estate, the minutes showed.

Regarding developments in energy markets, the board said that it expected easing fuel costs would help contain inflation, but warned that a renewed oil shock could further constrain the central bank’s ability to maintain its policy stance while balancing inflation risks.