The nation's inflation rate accelerated at its fastest pace in five months last month after thunderstorms damaged crops, making food more expensive, and as higher oil prices raised transport costs.
The consumer price index rose 1.73 percent last month from a year earlier, the biggest gain since January, after rising a revised 1.59 percent in May, the statistics bureau said in Taipei yesterday. That was more than the median forecast of a 1.6 percent increase in a Bloomberg News survey of 19 economists.
Central banks in Asia, Europe and the US have been raising interest rates to keep surging oil and commodity prices from fanning inflation. Taiwan's central bank last week lifted borrowing costs an eighth straight time, and Governor Perng Fai-nan (彭淮南) said rates are "still some distance away from a neutral level," signaling more increases may come.
"We continue to expect the central bank to hike the policy rate in September," Enoch Fung, an economist at Goldman Sachs in Hong Kong, wrote in a report. "The likelihood of a rate hike in December has also increased as we foresee more pass-through of inflation pressure."
Taiwan's wholesale price index rose 8.71 percent last month from a year earlier, compared with May's revised 6.56 percent increase, the report showed.
The central bank on June 29 raised its benchmark interest rate one-eighth of a percentage point to 2.5 percent, the highest in almost five years. The US Federal Reserve last week boosted its rate for the 17th time to 5.25 percent.
Diesel and fuel costs jumped 15.2 percent last month from a year earlier, according to the statement. The price of food gained 3.48 percent from a year earlier and climbed 2.03 percent from May. Vegetable prices surged 28.78 percent last month from May.
Crop and farmland damage from heavy rains since late May totaled NT$710 million (US$22 million), the Council of Agriculture said on June 12.
"We shouldn't be worried about inflation now. Food prices only went up because of bad weather," said Ming Han Lee, an economist at Grand Cathay Securities (大華證券) in Taipei, whose forecast was the most accurate in the survey. "Inflation will ease in the coming months."
Consumer prices may rise more than 2 percent this year on soaring prices for farm products and commodities, the Chinese-language Commercial Times reported on June 11, citing the Council for Economic Planning and Development.
Also stoking inflation, crude oil prices have surged 24 percent in the past year, according to futures traded in New York.
China Airlines (華航) and EVA Airways Corp (長榮航空), the nation's two largest carriers, on June 7 said they had received government approval to raise fuel surcharges, the third time in about nine months, starting from June 21.
RSS