Taiwan Interest Rate Unchanged as Expected

Taiwan's central bank kept its key discount rate unchanged at 2% during its March 2026 policy meeting, in line with market expectations and continuing a pause that has been in place since March 2024. Taiwan’s economy remained robust, with GDP rising 12.65% year-on-year in Q4 2025, marking the fastest growth since Q3 1987, driven by strong external demand in emerging technologies such as AI. Meanwhile, the annual inflation rate climbed to 1.75% in February 2026 from a five-year low of 0.69% in the previous month, marking its highest reading since April 2025. The significant upturn was driven in part by Lunar New Year holiday effects and rising global commodity prices amid Middle East tensions. The bank revised its 2026 annual CPI and core CPI forecasts to 1.80% and 1.75%, respectively. Nevertheless, the bank emphasized that it will closely monitor geopolitical risks, US trade policies, monetary policy moves by major economies, developments in the AI sector, and extreme weather events.

Taiwan’s central bank left its key discount rate unchanged at 2% at its December 2025 meeting, in line with market expectations and extending a pause in policy since March 2024. Policymakers cited moderate inflation, with headline CPI forecast to rise 1.66% year on year and core CPI at 1.65%, both lower than in 2024 and expected to ease further to 1.63% in 2026. Economic growth has remained robust, with GDP expanding 7.18% year-on-year in the first three quarters, surpassing forecasts, and full-year growth expected at 7.31%, well above the September projection of 4.55%, supported by strong demand for emerging technologies such as AI, which has driven substantial export growth. The central bank noted ongoing global uncertainties, including potential US trade-policy shocks, slower growth in China, and geopolitical and climate risks, while Taiwanese goods remain subject to a 20% US tariff amid ongoing negotiations for a more favorable agreement.

The Central Bank of Taiwan maintained its key discount rate at 2% in its September 2025 meeting, in line with market expectations. The decision reflects a cautious approach amid global uncertainties, including US trade policy, major central bank actions, slowing growth in China, and geopolitical risks. Taiwan’s economy outperformed in H1 2025, supported by strong demand for AI and emerging technologies, robust exports, and expanding private investment. The central bank raised its GDP forecast for 2025 to 4.55%. CPI for January–August 2025 averaged 1.83%, partly due to elevated food prices amid recent weather conditions, while core CPI rose 1.64%. The central bank projects full-year CPI and core CPI growth of 1.75% and 1.67%, respectively, both below 2024 levels of 2.18% and 1.88%. The Bank emphasized that keeping the policy rate steady aims to navigate global economic uncertainties and US trade policy risks, while supporting stable domestic growth and continued moderation in inflation.