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June’s inflation has hit a 17-month high. Prices rose 2.6% from a year ago, staying above the government’s warning threshold for a second straight month. At the same time, the New Taiwan dollar has weakened past 32 against the US dollar, while Taiwan’s AI-fueled stock rally is raising concerns of a market bubble. But Central Bank Governor Yang Chin-long says inflation expectations remain stable, that Taiwan’s economy is strong, and the AI boom has not yet reached bubble territory.

June’s CPI saw an increase of 2.6% from the year before, marking the second month in a row above the government’s warning threshold of 2%, and a 17-month high.

Yang Chin-long
Central Bank Governor
As of June this year, nearly 20 major institutions forecast an average inflation rate of 1.9% for the year, with the figure expected to drop to 1.7% next year. Overall, inflation is expected to remain stable.

A stronger US dollar, and net selling by foreign investors in the Taiwan stock market has depreciated the New Taiwan dollar, which dropped past NT$32 to the greenback. The Central Bank says it will continue with its “willow theory” approach, and allow the currency to sway.

Yang Chin-long
Central Bank Governor
Though the US dollar is indeed strong, and interest rates are on the higher end, Taiwan’s economy is performing well. Exports are strong, growth is robust and inflation is under control. So these solid fundamentals are helping offset the impact of a strong US dollar.

The stock market has been bustling with activity, and investors have been taking out loans to cash in on the AI surge. But concerns are rising about a bubble.

Yang Chin-long
Central Bank Governor
The government’s tax revenue is strong, and the stock market has been very active. Though we are keeping an eye on the issue, I think the AI wave is fueled by genuine momentum. We need to watch closely whether excessive leverage is building up through credit expansion. That’s what we should be concerned about.

While acknowledging concerns over an overheated stock market and increasing investment leverage, Yang cautioned investors about potential risks. However, he said he does not believe the AI boom has entered bubble territory.

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