Taiwan’s Central Bank announced on September 18, 2025, that the benchmark interest rate remains at 2.00%, consistent with the previous eight consecutive decisions since March 2024. This steady stance reflects the bank’s cautious approach amid moderate inflation and slowing global demand. The rate has been stable since the 2.00% hike from 1.88% in March 2024, marking a period of monetary policy normalization after pandemic-era easing.

Drivers this month

• Inflation steady at 2.10% YoY in August 2025, near the Central Bank’s target range.
• GDP growth slowed to 2.30% in Q2 2025, down from 3.10% in Q2 2024.
• Export orders weakened due to global tech sector softness and US-China trade frictions.

Policy pulse

The 2.00% rate aligns with the Central Bank’s inflation target of 1.50–2.50%, signaling a neutral monetary stance. The bank’s forward guidance emphasizes data dependency, with no immediate plans for hikes or cuts.

Market lens

Immediate reaction: The TWD/USD pair remained stable near 30.50, while 2-year government bond yields held at 1.85%. Market participants interpreted the decision as dovish-neutral, reflecting balanced risks.

Core macroeconomic indicators underpin the Central Bank’s decision. Inflation, GDP growth, and labor market data provide a comprehensive picture of Taiwan’s economic health.

Inflation and growth trends

• Consumer Price Index (CPI) rose 2.10% YoY in August 2025, stable versus 2.00% in July and below the 12-month average of 2.30%.
• GDP expanded 2.30% YoY in Q2 2025, down from 3.10% in Q2 2024 and 2.80% in Q1 2025, indicating a moderation in economic momentum.
• Unemployment rate steady at 3.70%, reflecting a resilient labor market despite external headwinds.

Monetary policy & financial conditions

The Central Bank’s policy rate at 2.00% has been unchanged for six consecutive meetings. Financial conditions remain accommodative but cautious, with credit growth at 4.50% YoY and stable liquidity in the banking system.

Fiscal policy & government budget

Taiwan’s fiscal stance remains moderately expansionary, with a 2025 budget deficit forecast at 2.10% of GDP. Government spending focuses on infrastructure and technology innovation to support long-term growth.

Drivers this month

• Inflation steady near target reduces pressure for immediate hikes.
• GDP growth slowdown tempers urgency for easing.
• External uncertainties encourage a wait-and-see approach.

Policy pulse

The Central Bank’s decision signals a neutral stance, balancing inflation containment with growth support. The steady rate contrasts with regional peers who have either tightened or eased recently.

Market lens

Immediate reaction: Taiwan government bond yields and the TWD currency showed minimal volatility post-announcement, reflecting market confidence in the Central Bank’s calibrated approach.

Looking ahead, Taiwan’s monetary policy will navigate a complex environment of moderate domestic growth, stable inflation, and external risks. The Central Bank’s forward guidance emphasizes flexibility and responsiveness to evolving data.

Bullish scenario (30% probability)

• Global tech demand rebounds, boosting exports and GDP growth above 3.50% in 2026.
• Inflation remains contained below 2.50%, allowing the Central Bank to maintain or cut rates slightly.
• Geopolitical tensions ease, improving investor sentiment and capital inflows.

Base scenario (50% probability)

• Growth stabilizes around 2.00–2.50%, with inflation near target.
• Monetary policy remains on hold, balancing inflation risks and growth support.
• External uncertainties persist but do not escalate significantly.

Bearish scenario (20% probability)

• US-China tensions intensify, disrupting supply chains and exports.
• Inflation spikes above 3%, forcing the Central Bank to consider rate hikes.
• Global recession risks materialize, weakening domestic demand and financial conditions.

Taiwan’s interest rate decision to hold at 2.00% reflects a balanced monetary policy amid moderate inflation and growth. The Central Bank’s cautious stance is appropriate given external uncertainties and structural shifts in the economy. Market reactions were muted, signaling confidence in the bank’s data-driven approach. Going forward, close monitoring of inflation trends, global demand, and geopolitical developments will be critical. The policy outlook remains conditional, with flexibility to adjust as new data emerges.

Key Markets Likely to React to Interest Rate Decision

Taiwan’s interest rate decision influences a range of financial markets, particularly those linked to currency, bonds, and technology sectors. The following symbols historically track Taiwan’s monetary policy shifts and macroeconomic conditions:

• TWDTWD – Taiwan Dollar spot rate, directly impacted by interest rate changes and capital flows.
• 2330.TW – Taiwan Semiconductor Manufacturing Company (TSMC), sensitive to export demand and financial conditions.
• 0050.TW – Taiwan 50 ETF, representing broad market sentiment linked to economic outlook.
• USDTWD – USD/TWD currency pair, reflecting cross-border capital flows and monetary policy divergence.
• BTCUSD – Bitcoin, often viewed as a risk asset influenced by macroeconomic and monetary policy shifts globally.

FAQs

What is the significance of Taiwan’s interest rate decision?

The decision guides borrowing costs, inflation control, and economic growth, impacting financial markets and investor sentiment.

How does the interest rate affect Taiwan’s currency?

Higher rates typically strengthen the TWD by attracting capital inflows, while stable or lower rates may weaken it.

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

Risks include geopolitical tensions, global tech demand fluctuations, and unexpected inflation spikes.

Key takeaway: Taiwan’s steady 2.00% interest rate reflects balanced policy amid moderate inflation and growth, with external risks shaping future moves.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.