Inflation accelerates on timing of holiday

Taiwan's inflation accelerated last month as the Lunar New Year holiday encouraged families to spend more and retailers to increase prices.

The consumer price index gained 1.74 percent from a year earlier after climbing 0.4 percent in January, the statistics bureau said in a statement yesterday.

Retailers charged more for food and clothing, as families celebrated and stocked up for the new year, and taxi drivers put up their fares. Lunar New Year fell last month and in January last year. Economists often combine figures for the two months to remove distortions.

"The rise was largely due to the Chinese New Year," said Jason Yeh, an economist at Jih Sun Securities Ltd (日盛證券).

"We have not changed our view on the whole-year inflation outlook," said Yeh, who expects consumer prices to rise 1.5 percent this year.

Taiwan's consumer prices rose an average of 1 percent across January and February. The government has forecast a 1.4 percent increase for the year.

Vegetable prices jumped 13.63 percent last month from a year earlier, while tobacco and alcohol climbed 7.62 percent, the statistics bureau said. Seafood rose 8.95 percent. Clothing climbed 3 percent.

Core consumer prices, which exclude food and energy costs, rose 1.65 percent last month from a year earlier after falling 0.1 percent in the previous month, the bureau said. Fuel prices rose 4.83 percent.

Inflation remains "very modest," Yeh said.

Wholesale prices rose 6.77 percent after gaining 7.1 percent in January, the statistics bureau said.

Taiwan has raised interest rates each quarter since September 2004 to narrow the gap with borrowing costs in other countries and stem money outflows that may weaken the island's currency. Still, the benchmark rate remains the lowest among Asian countries except Japan, at 2.75 percent.

Central bank Governor Perng Fai-nan (彭淮南) said in December that inflation is "low and stable" and he will adjust interest rates to an "appropriate level."