The latest interest rate announcement for Taiwan (TW) on September 18, 2025, confirmed the benchmark rate at 2.00%, unchanged from the previous two releases in March and June 2025. This steady stance reflects the central bank’s cautious approach amid a complex macroeconomic environment characterized by moderate inflation, stable growth, and external uncertainties.

Drivers this month

• Inflation remains near 2.10% YoY, close to the central bank’s target range.
• GDP growth steady at 3.20% annualized in Q2 2025, supported by exports and domestic demand.
• Global geopolitical tensions in East Asia and supply chain disruptions persist.

Policy pulse

The 2.00% rate aligns with the central bank’s inflation targeting framework, balancing growth support with price stability. The unchanged rate signals confidence in current monetary conditions without preemptive tightening.

Market lens

Financial markets showed limited volatility post-announcement. The Taiwan dollar (TWD) held steady against the USD, while 2-year government bond yields remained near 1.85%, reflecting stable expectations for monetary policy continuity.

Core macroeconomic indicators underpin the interest rate decision. Inflation, employment, and growth metrics provide a comprehensive view of Taiwan’s economic health.

Inflation and price stability

Consumer Price Index (CPI) inflation stood at 2.10% YoY in August 2025, marginally above the 1.90% recorded a year ago but within the central bank’s 1.50–2.50% target band. Core inflation, excluding volatile food and energy prices, remained steady at 1.80% YoY, signaling contained underlying price pressures.

Growth and labor market

GDP growth for Q2 2025 was 3.20% YoY, slightly below the 3.50% average of the previous four quarters but robust given global headwinds. The unemployment rate held at 3.70%, consistent with historical lows, supporting steady consumer spending.

Fiscal policy & government budget

Taiwan’s fiscal stance remains moderately expansionary, with a 2025 budget deficit projected at 2.30% of GDP, slightly higher than the 1.90% deficit in 2024. Increased infrastructure and technology investments aim to boost long-term productivity.

Drivers this month

• Stable inflation near target reduces urgency for rate changes.
• Moderate GDP growth supports steady monetary conditions.
• External risks, including US-China tensions, limit policy flexibility.

Policy pulse

The central bank’s decision to maintain the rate at 2.00% signals a wait-and-see approach. This contrasts with the 2024 tightening cycle, where rates increased by 75 basis points over six months to combat inflation spikes.

Market lens

Immediate reaction: The TWD/USD pair remained stable within 0.20% of pre-announcement levels, while 2-year government bond yields held at 1.85%, indicating market confidence in the central bank’s steady policy.

Looking ahead, Taiwan’s interest rate trajectory depends on inflation dynamics, external shocks, and fiscal developments. We outline three scenarios with associated probabilities:

Bullish scenario (30% probability)

• Inflation remains subdued below 2%, allowing rates to stay at 2.00% or lower.
• Global trade improves, boosting exports and growth above 3.50%.
• Geopolitical tensions ease, reducing risk premia.

Base scenario (50% probability)

• Inflation hovers near 2.10%, consistent with current levels.
• GDP growth remains steady around 3.00–3.20%.
• Monetary policy remains on hold through 2025, with gradual adjustments possible in 2026.

Bearish scenario (20% probability)

• Inflation spikes above 2.50% due to supply shocks or wage pressures.
• Global demand weakens, pushing growth below 2.50%.
• Heightened geopolitical risks trigger financial market volatility, prompting rate hikes.

Risks and opportunities

Upside risks include faster-than-expected global recovery and fiscal stimulus benefits. Downside risks stem from supply chain disruptions, energy price shocks, and geopolitical escalations affecting trade and investment.

Taiwan’s interest rate stability at 2.00% reflects a balanced monetary policy amid moderate inflation and steady growth. The central bank’s cautious stance acknowledges external uncertainties while supporting domestic economic resilience. Market reactions confirm confidence in this approach, though vigilance remains essential given evolving global risks.

Structural trends such as Taiwan’s aging population and technological innovation will shape long-run monetary policy frameworks. Fiscal policy’s moderate expansion complements monetary stability, aiming to sustain growth without overheating the economy.

Key Markets Likely to React to Interest Rate

Interest rate decisions in Taiwan typically influence currency, bond, and equity markets. The Taiwan dollar (TWD) often reacts to rate changes, affecting export competitiveness. Government bond yields reflect monetary policy expectations, while select tech stocks and regional currency pairs track economic sentiment shifts.

• TWDUSD – Directly impacted by interest rate stability, influencing trade flows.
• TSMC – Taiwan’s largest tech stock, sensitive to macroeconomic shifts.
• 2330.TW – Taiwan Semiconductor Manufacturing Company, a bellwether for economic health.
• USDCNH – Regional currency pair reflecting China-Taiwan trade dynamics.
• BTCUSD – Crypto market sentiment often correlates with risk appetite influenced by interest rates.

FAQs

What is the current interest rate in Taiwan?

The interest rate is steady at 2.00% as of September 2025.

How does Taiwan’s interest rate affect inflation?

The rate aims to keep inflation near the 2% target, balancing growth and price stability.

What are the risks to Taiwan’s monetary policy outlook?

Risks include inflation spikes, geopolitical tensions, and global demand shocks.

Takeaway: Taiwan’s steady 2.00% interest rate reflects a cautious, data-driven monetary policy balancing inflation control and growth support amid external uncertainties.