DBS Bank’s Group Research expects that Taiwan’s central bank will keep the policy rate steady at 2.00% until 2026. Inflation should remain below the 1.5–2.0% comfort zone, suggesting a stable economy with low price pressures. As Taiwan’s economic growth surpasses expectations, the central bank might gradually reduce liquidity support. Since there are no inflationary pressures, there are no plans to raise the rate in the immediate future.

Role Of Artificial Intelligence And Editorial Review

An Artificial Intelligence tool helped create this article, which was then reviewed by an editor. The FXStreet Insights Team, made up of journalists, gathers market insights from recognized experts, providing extra perspectives from commercial sources and analysts. With the central bank likely to maintain the policy rate at 2.00%, we expect low interest rate volatility. This stability means that near-term interest rate swaps and forward contracts should reflect a very low chance of any rate change. Traders should look for positions that benefit from this expected calm in the rates market. Recent statistics from late 2025 support this view. The consumer price index for December showed a steady 1.48%, and strong GDP growth of 3.6% in the fourth quarter, driven by robust electronics exports, gives the central bank no urgent reason to change its policy. We see this data as further evidence that the current rate is suitable for the economy.

Currency Derivatives And Market Strategy

For traders in currency derivatives, this policy outlook suggests the USD/TWD pair will likely remain stable in the coming weeks. We noted that the pair traded within a predictable range for much of the second half of 2025, and this trend may continue. Strategies that benefit from low volatility, like selling short-dated currency options, could be advantageous. Even though the main policy rate is expected to stay steady, we should keep an eye on the gradual reduction of liquidity support measures. This signifies a subtle tightening of monetary policy that could strengthen the Taiwan dollar. Any official communication indicating a quicker withdrawal could signal potential currency strength. The significant interest rate difference with other major economies, such as the United States, where rates reached 4.50% at the end of 2025, will continue to affect capital flows. This gap might deter overly aggressive bullish positions on the Taiwan dollar. We expect any strength in the local currency to be moderated by this ongoing carry trade dynamic. Create your live VT Markets account and start trading now.

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