Taiwan central bank raises key interest rate in surprise move

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, a tightening at odds with the broader global trend.

Major central banks are signaling that interest rates will likely move lower in coming months as inflation weakens, leaving Taiwan as somewhat of an outlier along with the Bank of Japan, which also raised rates this week.

Taiwan's 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. Still, the new rate remains at a much lower level relative to major economies.

Central bank governor Yang Chin-long said the decision was not unanimous, with one board member voting to stand pat.

"The tone of our monetary policy is still tightening, but it won't be yet tighter," he told reporters, describing the hike as mild. "Our hiking is not the same as other countries. We are doing it gradually, and on a small scale."

Yang added while the central bank would not give guidance like the U.S. Federal Reserve, there will probably not be further hikes for Taiwan.

The 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.

First Capital Management analyst Chengyu Liu described the rate rise as a