Taiwan Holds Rate at 2% as Expected

The Central Bank of the Republic of China, Taiwan's monetary authority, maintained its benchmark interest rate unchanged at 2% in its June 2026 decision, as expected by the large majority of the market, to hold borrowing costs at their since 2008 for the ninth straight quarter. The decision contrasted with monetary authorities across Asia, which have commenced their hiking cycles as higher energy prices from the war in Iran exacerbated inflationary pressures. Inflation in Taiwan rose past 2% for the first time in one year in May, crossing the alert threshold for the central bank. This was combined with soaring growth in the economic area amid the global boom for high-end semiconductors and AI infrastructure products, driving the country to revised export growth this year upwards to 40%.

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.