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Taiwan inflation uptick seen boosting CBC hawkish bias on USD/TWD
Core CPI at 2.5% and headline CPI rising to 2.6% year over year point to higher inflation pressure, with Commerzbank flagging a possible 12.5 bp policy-rate hike in the second half.
Commerzbank, as featured by FXStreet, said stronger Taiwan inflation could push the Central Bank of the Republic of China toward a more hawkish stance, even as economic momentum remains solid. The bank cited core CPI at 2.5% and said the pickup in core inflation reduces scope for the CBC to look through temporary energy driven price effects.
FXStreet reports that headline CPI accelerated to 2.6% year over year from 2.2% in May, the fastest pace since January 2025, driven mainly by higher fuel, gas, and electricity costs. It also noted services inflation stayed firm at 2.9%, versus 2.5% previously.
With the CBC having last hiked by 12.5 bp to a 2% policy rate in March 2024 and held it since, Commerzbank’s view is that another 12.5 bp hike could be possible in the second half of the year. FXStreet also tied the inflation backdrop to persistent domestic demand and AI-driven exports.
FXStreet added that USD/TWD has risen to 32.19, though analysts expect the move could cool once seasonal dividend outflows fade, potentially leading to a pullback in the pair. It said net seasonal dividend outflows have weighed on the Taiwan dollar and that a normalization effect may follow.