By Liang-sa Loh and Faith Hung
TAIPEI (Reuters) -Taiwan's central bank surprised markets by raising its policy rate on Thursday, wary of continued inflationary pressures and ahead of an expected rise in electricity prices next month.
The central bank hiked the benchmark discount rate to 2% from 1.875%, where it has stood since last March, citing concern about the effect of April's power price hike and as inflation persists.
In a Reuters poll, 25 out of 26 economists had predicted the central bank would keep the rate unchanged. The new rate remains at a much lower level relative to major economies.
Taiwan's central bank increased its forecast for the consumer price index (CPI) this year to 2.16% from a previous prediction of 1.89%.
The island's CPI rose 3.08% in February, a 19-month high, as food prices climbed during the Lunar New Year holiday.
Taiwan's government will announce on Friday by how much electricity prices will go up.
Taiwan's unexpected rate rise follows the U.S. Federal Reserve's decision on Wednesday to leave rates on hold though it indicated it would stick with plans to cut borrowing costs this year.
Taiwan's central bank also raised its 2024 estimate for economic growth to 3.22% from a forecast of 3.12% in December, as global demand for made-in-Taiwan tech products as well as domestic spending rebound.
The economy grew at its slowest pace in 14 years in 2023.
(Reporting by Liang-sa Loh and Faith Hung; Writing by Ben Blanchard; Editing by Jacqueline Wong)
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