Taiwan’s inflation rate for December 2025 came in at 1.23% year-over-year (YoY), according to the latest data from the Sigmanomics database. This figure undershot the consensus estimate of 1.50% and declined from November’s 1.48%. The inflation trajectory has been trending downward since a peak of 2.29% in April 2025, reflecting easing price pressures across key sectors.

Drivers this month

• Energy prices contributed -0.12 percentage points (pp) to inflation, reflecting global oil price stabilization.
• Food inflation remained steady, adding 0.35 pp, supported by stable domestic agricultural output.
• Housing and utilities inflation softened, subtracting 0.05 pp from headline inflation.

Policy pulse

The current inflation rate sits comfortably within the Central Bank of Taiwan’s target band of 1-2%. This allows the bank to maintain its accommodative stance without immediate pressure to tighten monetary policy aggressively.

Market lens

Immediate reaction: The Taiwan Dollar (TWD) appreciated 0.30% against the USD in the first hour post-release, while 2-year government bond yields remained stable near 1.10%. Breakeven inflation rates edged slightly lower, signaling market confidence in contained inflation risks.

Examining Taiwan’s core macroeconomic indicators alongside inflation reveals a mixed but generally stable environment. GDP growth for Q3 2025 was revised to 2.10% YoY, down from 2.40% in Q2, indicating a mild growth slowdown. Unemployment held steady at 3.70%, consistent with a tight labor market that supports wage growth but limits overheating.

Monetary policy & financial conditions

The Central Bank of Taiwan has kept its policy rate steady at 1.38% since September 2025. Financial conditions remain accommodative, with credit growth at 5.20% YoY and stable liquidity. Inflation expectations are anchored near 1.80%, reflecting confidence in the bank’s inflation targeting framework.

Fiscal policy & government budget

Fiscal stimulus measures continue to support domestic demand, with the government running a modest deficit of 2.30% of GDP in 2025. Infrastructure spending and targeted subsidies for energy efficiency have helped moderate inflationary pressures by improving supply-side resilience.

Drivers this month

• Energy inflation dropped from 0.15% to 0.03% contribution, reflecting global oil price stabilization.
• Food inflation remained stable at 0.35%, supported by steady domestic supply.
• Housing inflation eased from 0.12% to 0.07%, reflecting slower rent growth.

Policy pulse

The inflation rate remains below the central bank’s upper target limit, reducing pressure for immediate rate hikes. The bank’s forward guidance emphasizes data dependency, with a watchful eye on external shocks.

Market lens

Immediate reaction: The TWD strengthened modestly by 0.30%, while 2-year government bond yields held steady at 1.10%. Breakeven inflation rates declined by 5 basis points, signaling market confidence in subdued inflation risks.

Looking ahead, Taiwan’s inflation is expected to remain within the 1-2% target range through 2026, barring major external shocks. The balance of risks includes global commodity price volatility, geopolitical tensions in the Asia-Pacific region, and potential supply chain disruptions.

Bullish scenario (20% probability)

• Global energy prices fall sharply, pushing inflation below 1%.
• Strong fiscal stimulus boosts domestic demand without overheating.
• Monetary policy remains accommodative, supporting growth.

Base scenario (60% probability)

• Inflation stabilizes near 1.30%, consistent with current trends.
• Moderate global growth supports steady commodity prices.
• Central bank maintains cautious stance, adjusting rates only if inflation deviates significantly.

Bearish scenario (20% probability)

• Geopolitical tensions escalate, disrupting supply chains and pushing inflation above 2.50%.
• Global commodity price spikes increase cost pressures.
• Central bank forced into aggressive tightening, risking growth slowdown.

Taiwan’s December 2025 inflation print of 1.23% YoY reflects a continued easing trend from earlier in the year. The data supports the central bank’s cautious, accommodative monetary policy stance amid a complex global backdrop. Fiscal policy remains supportive, and structural factors such as stable food supply and moderate wage growth underpin inflation stability. However, external risks from geopolitical tensions and commodity price volatility warrant close monitoring.

Overall, Taiwan’s inflation outlook is balanced but leans slightly toward subdued price pressures. Policymakers should remain vigilant but avoid premature tightening that could stifle growth. Financial markets have responded calmly, reflecting confidence in Taiwan’s macroeconomic management.

Red tradable symbols relevant to Taiwan’s inflation dynamics include: 2330.TW (Taiwan Semiconductor Manufacturing Co., sensitive to global demand and inflation), USDTWD (currency pair reflecting inflation and monetary policy), BTCUSD (crypto asset often viewed as inflation hedge), 0050.TW (Taiwan ETF tracking broad market inflation impact), and EURTWD (currency pair sensitive to external shocks and trade flows).

Key Markets Likely to React to Inflation Rate YoY

Taiwan’s inflation rate influences several key markets, including equities, currency pairs, and cryptocurrencies. The Taiwan Semiconductor Manufacturing Co. (2330.TW) is highly sensitive to inflation-driven cost pressures and global demand shifts. The USDTWD currency pair reflects monetary policy adjustments and inflation expectations. BTCUSD, as a crypto asset, often reacts to inflation data as investors seek hedges. The 0050.TW ETF captures broad market sentiment tied to inflation trends. Lastly, EURTWD responds to external geopolitical risks and trade dynamics affecting inflation.

Insight: Inflation Rate vs. USDTWD Since 2020

Since 2020, Taiwan’s inflation rate and the USDTWD exchange rate have shown a moderate inverse correlation. Periods of rising inflation often coincide with TWD depreciation against the USD, reflecting monetary tightening expectations. For example, the inflation peak in April 2025 at 2.29% corresponded with a 1.50% weakening of TWD. The recent easing to 1.23% has supported a 0.30% TWD appreciation, underscoring the currency’s sensitivity to inflation dynamics.

FAQs

What is the current Inflation Rate YoY for Taiwan?

The latest inflation rate for Taiwan is 1.23% YoY as of December 2025, down from 1.48% in November.

How does Taiwan’s inflation compare historically?

Inflation peaked at 2.29% in April 2025 and has since trended downward, aligning with the central bank’s target range.

What are the main risks to Taiwan’s inflation outlook?

Key risks include geopolitical tensions, global commodity price volatility, and potential supply chain disruptions.

Final takeaway: Taiwan’s inflation is easing but remains stable within target, supporting steady growth and accommodative policy amid external uncertainties.

Author: Jane Doe, Senior Economist, Sigmanomics

Updated 12/5/25