Taiwan’s inflation rate for December 2025 rose 0.09% month-over-month, according to the latest data from the Sigmanomics database. This figure came in slightly below the consensus estimate of 0.10% and marks a significant slowdown from November’s 0.25% increase. Over the past year, inflation has averaged roughly 0.12% MoM, indicating a modest but persistent upward trend.

Drivers this month

• Energy prices contributed 0.04 percentage points, reflecting moderate global oil price volatility.
• Food inflation added 0.03 percentage points, driven by seasonal supply constraints.
• Core goods and services inflation remained stable, contributing 0.02 percentage points.

Policy pulse

The current inflation rate remains within the Central Bank of Taiwan’s comfort zone, below the 2% annual target threshold. The moderation from November’s spike suggests that monetary policy tightening measures have begun to temper price pressures without stifling growth.

Market lens

Immediate reaction: The TWD/USD exchange rate showed minimal movement, fluctuating within 0.10% post-release. Short-term government bond yields edged down by 3 basis points, reflecting a cautious but steady market sentiment.

Examining Taiwan’s core macroeconomic indicators alongside inflation reveals a mixed but stable economic environment. GDP growth for Q3 2025 was reported at 2.30% YoY, slightly below the 2.50% forecast but consistent with a moderate expansion phase. Unemployment remains low at 3.70%, supporting consumer spending.

Monetary Policy & Financial Conditions

The Central Bank of Taiwan has maintained a cautious stance, keeping benchmark interest rates steady at 1.75%. Financial conditions remain accommodative, with credit growth at 5.10% YoY, supporting business investment despite global uncertainties.

Fiscal Policy & Government Budget

Fiscal policy continues to be expansionary, with the government running a deficit of 2.80% of GDP in 2025. Increased infrastructure spending and social welfare programs aim to bolster domestic demand, indirectly influencing inflation dynamics.

External Shocks & Geopolitical Risks

Taiwan faces ongoing geopolitical tensions in the region, which pose risks to trade and investment flows. Recent supply chain disruptions have contributed to price volatility, particularly in energy and food sectors, but these effects have been partially offset by stable export demand.

Drivers this month

• Energy price volatility was contained, contributing less than half the November impact.
• Food inflation remained steady but showed signs of easing compared to October’s 0.24% rise.
• Core inflation components such as housing and transportation held stable, supporting the moderation.

Market lens

Immediate reaction: The Taiwan Stock Exchange Index (TWSE) dipped 0.30% within the first hour, reflecting investor caution. The TWD currency remained stable against the USD, while 2-year government bond yields declined slightly, indicating expectations of steady monetary policy.

Looking ahead, Taiwan’s inflation trajectory will depend on several key factors. Global commodity prices, particularly oil and food, remain volatile amid geopolitical tensions. Domestic demand is expected to grow moderately, supported by fiscal stimulus and stable labor markets.

Bullish scenario (30% probability)

• Global supply chains normalize, reducing cost pressures.
• Strong export growth boosts income and consumption.
• Inflation stabilizes around 0.08% MoM, supporting real wage gains.

Base scenario (50% probability)

• Inflation moderates to 0.10% MoM, consistent with recent trends.
• Monetary policy remains steady, balancing growth and price stability.
• External shocks cause mild volatility but no sustained inflation spikes.

Bearish scenario (20% probability)

• Geopolitical tensions escalate, disrupting trade and supply chains.
• Energy and food prices surge, pushing inflation above 0.20% MoM.
• Central bank forced to tighten policy aggressively, risking growth slowdown.

Taiwan’s December inflation rate signals a cooling from the prior month’s spike, reflecting a complex interplay of domestic and external factors. The Central Bank’s cautious stance appears appropriate, balancing inflation control with growth support. Structural trends such as demographic shifts and technological adoption will shape long-run inflation dynamics. Policymakers and investors should monitor commodity markets and geopolitical developments closely.

Key Markets Likely to React to Inflation Rate MoM

Inflation data in Taiwan typically influences currency, bond, and equity markets. The TWD/USD forex pair reacts to shifts in inflation expectations and monetary policy outlook. The Taiwan Stock Exchange Index (TWSE) often moves in response to inflation-driven changes in corporate earnings forecasts. Government bond yields adjust to inflation trends, affecting fixed income valuations. Additionally, global commodities and crypto markets may show correlated volatility due to inflation-linked risk sentiment.

• TWDUSD – Directly impacted by inflation-driven monetary policy shifts.
• TWSE – Reflects corporate earnings sensitivity to inflation.
• TSMC – Taiwan’s largest exporter, sensitive to inflation and currency moves.
• BTCUSD – Often viewed as an inflation hedge, reacts to inflation surprises.
• USDTWD – Inverse of TWDUSD, useful for cross-market hedging strategies.

FAQs

What is the current inflation rate MoM for Taiwan?

The latest inflation rate for Taiwan in December 2025 is 0.09% month-over-month.

How does Taiwan’s inflation affect monetary policy?

Moderate inflation supports the Central Bank’s steady interest rate stance, balancing growth and price stability.

What are the risks to Taiwan’s inflation outlook?

Key risks include geopolitical tensions, commodity price shocks, and supply chain disruptions.

Takeaway: Taiwan’s inflation is cooling but remains sensitive to external shocks. Balanced policy and vigilant monitoring are essential for sustained economic stability.