Bank of Taiwan Holds Rates Steady
Amid Mild Inflation, Global Uncertainty
Taipei, December 18, 2025 – The Central Bank of the Republic of China (Taiwan) announced its monetary policy decision for the fourth quarter of 2025, with the Board voting unanimously to keep policy rates unchanged. The decision reflects a judgment that a rate hold will help sustain sound economic and financial development, balancing expectations for solid domestic growth against significant global uncertainties.
The discount rate remains at 2%, the rate on refinancing of secured loans at 2.375%, and the rate on temporary accommodations at 4.25%. The primary rationale for maintaining the current stance is the domestic outlook, where the inflation rate is projected to stay below 2% next year, coupled with expectations for solid economic performance.
Domestic Economic Strength and Mild Inflation Outlook
Taiwan’s economy performed better than anticipated earlier in the year, achieving an expansion of 7.18% in the first three quarters compared to the same period a year ago. This strong performance was fueled by persistent strong demand for artificial intelligence (AI) and other emerging technology applications, which boosted exports and further increased private investment. The Bank forecasted the GDP growth rate for 2025 to register 7.31%.
Looking ahead to 2026, the Bank projects the GDP growth rate will remain solid at 3.67%. This expected growth is sustained by persistent demand for emerging technology applications, though exports and private investment growth momentum are anticipated to be moderate due to a higher base effect and slower global trade expansion.
Inflation trends downwards, reflecting stabilized food prices and the continued effect of exemptions or reductions of commodity taxes. The annual growth rate of the Consumer Price Index (CPI) is forecasted to register 1.66% in 2025, lower than the 2.18% recorded in 2024. For 2026, both the CPI and the core CPI annual growth rates are projected to register 1.63%, maintaining a mild outlook below 2%.
Domestic market liquidity remains ample, with long- and short-term market interest rates fluctuating within a narrow range, and excess reserves in the banking system averaging slightly above NT$45 billion between September and November 2025.
Global Headwinds and Divergent Policies
Globally, the economy is experiencing moderate growth, driven by expanding manufacturing activity tied to AI and emerging technology applications. However, international financial markets have seen increased volatility due to market expectations concerning the pace of monetary policy adjustments by major central banks and concerns about potential overvaluation in AI-related industries.
Major central banks have pursued divergent monetary policy paths since September 2025:
The U.S. Federal Reserve has continued rate reductions.
The European Central Bank has held off on rate cuts.
The Bank of Japan has yet to raise policy rates.
The People’s Bank of China has maintained an accommodative policy stance.
Global economic growth is forecasted to be slightly lower in 2026 than in 2025, and global inflation is projected to continue easing. Key risks surrounding the global outlook include the future course of U.S. economic and trade policies, slower growth momentum for China’s economy, monetary policy actions of major central banks, geopolitical conflicts, and climate change.
Transition in Real Estate Credit Controls
The central bank reviewed its selective credit control measures, including the moral suasion adopted in mid-August 2024, which asked banks to enhance internal quantitative control goals for aggregate real estate lending volumes.
Following the imposition of these measures, several indicators show improvement:
Loan-to-value (LTV) ratios for loans under credit controls have decreased.
Consumer expectations for housing price rises have eased.
Housing market transactions have cooled down, and the housing price uptrend has slowed.
The ratio of real estate lending to total lending has gradually decreased from a peak of 37.61% in June 2024 to 36.70% as of the end of November 2025.
Due to the achievement of quantitative control goals by most banks, the Bank is shifting its policy implementation. Starting next year (2026), banks may carry out quantitative controls at their own discretion, although they are required to submit monthly reports on related data. The Bank will maintain close oversight through these reports and targeted financial examinations to ensure compliance with selective credit control measures and to encourage the channeling of credit resources towards government initiatives, such as support for non-homeowner mortgage borrowers, urban renewal, and real investment by productive enterprises.
The NT dollar exchange rate is generally determined by market forces. However, the Bank will intervene to maintain an orderly market if irregular factors, such as massive short-term capital flows, lead to excess volatility or disorderly movements that threaten economic and financial stability.