Tue, Nov 07, 2006 - Page 12 News List

Vegetables lead another decline in CPI

BLOOMBERG

The nation's consumer prices declined for a third straight month last month as the cost of vegetables plunged.

The consumer price index (CPI) dropped 1.19 percent from a year earlier, the statistics bureau said in a statement yesterday.

Sliding prices may ease pressure on the central bank, which has raised interest rates over the past two years to a five-year high, to tighten them further.

"The central bank should back away from tightening given the sluggish economic growth," said Joseph Lau, an economist at Credit Suisse Group in Hong Kong. "They may stop raising rates at the next meeting in December."

The central bank in September lifted its benchmark interest rate for a ninth straight time to 2.625 percent. The bank at the time predicted full-year inflation of 1.5 percent, slowing from 2.3 percent last year.

Food costs dropped 6.66 percent last month from a year earlier, the statistics bureau said, with vegetable prices falling 26.66 percent. Diesel and fuel costs rose 7.06 percent last month from a year earlier.

Crude oil prices have fallen 16 percent in the past six months, and oil refiners Chinese Petroleum Corp (中油) and Formosa Petrochemical Corp (台塑石化) reduced domestic gasoline and diesel prices twice last month to reflect falling costs.

Core consumer prices rose 0.4 percent last month from a year earlier after climbing 0.36 percent the previous month, the bureau said.

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