Taiwan, home to major tech firms including the world's largest contract chip maker TSMC, has seen its exports wilt, with the economy slipping into recession in the first quarter.
The government last week projected the economy to grow 2.04% this year, scaling back from an earlier estimate of 2.12%.
Global inflationary pressure could continue while volatility in financial markets increases, driven by factors including tightening monetary policies of major world economies, climate change, and geopolitical conflicts, the central bank said in its annual financial stability report.
"All of these add further downside risks in the global economy," it said.
The central bank emphasised its commitment to taking timely measures to ensure the island's economic stability.
"We will continue to monitor any possible fallout closely and implement appropriate measures to foster domestic financial stability," it said.
At its most recent quarterly board meeting in March, the central bank raised its policy rate by 12.5 basis points (bps) to 1.875%, the fifth hike since it began the current round of tightening in March of last year.
It holds its next rate-setting meeting on June 15.
(Reporting by Liang-sa Loh and Faith Hung; Editing by Ben Blanchard, Toby Chopra and Andrew Heavens)
