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Fuel, tobacco push up consumer price index

The consumer price index (CPI) rose last month by 0.67 percent year-on-year because of increases in the prices of fuel, foreign tobacco and Chinese herbal medicine prices, the government's statistics bureau said yesterday.

The figure was up 1.14 percent, a seasonally adjusted increase of 0.16 percent, from March, the Directorate General of Budget, Accounting and Statistics (DGBAS) said.

The CPI's growth has slowed from February's 1.74 percent year-on-year increase and March's 0.84 percent rise as food costs last month decreased by 0.7 percent from a year ago.

Last month's core price index, which excludes prices of fresh vegetables, fruit, fishery products and energy, was up 0.62 percent from a year earlier and 0.88 percent from March.

The slowdown in Taiwan's inflation may be temporary because companies are starting to pass increased fuel and manufacturing costs on to consumers.

Central bank Governor Perng Fai-nan (彭淮南) said two months ago that price pressures remain a risk for the economy, and most economists expect he will raise interest rates again this year.

"We think the central bank will raise rates at their next meeting," Katie Dean, an economist at Australia & New Zealand Banking Group Ltd in Melbourne, said before the numbers. "Their main goal is to normalize interest rates to a neutral setting. Neutral is still higher from where they are now."

Benchmark boost

The monetary policymaker boosted its benchmark interest rate for the 11th straight quarter in March to ward off potential inflation risks as the direction of international raw material prices remains uncertain and the nation's housing prices have jumped 20 percent since mid 2003, it explained at the time.

The latest rate increase saw the rediscount rate, charged to commercial lenders, stand at a five-year high of 2.875 percent.

The DGBAS data showed that clothing prices last month rose 1.26 percent from the same period last year. Transportation costs were up 1.75 percent year-on-year, driven by the 5.95 percent jump in fuel prices.

Prices of tobacco and betel nuts increased 2.92 percent from last year, the statistics showed.

The central bank has adjusted its forecast for CPI growth down this year, from 1.75 percent to 1.5 percent, still higher than last year's 0.6 percent increase, because of favorable weather. DGBAS earlier put its CPI forecast figure at 1.43 percent for the year.

Wholesale prices last month shot up by 7.83 percent year-on-year, their fastest in eight months, as prices of chemical raw materials and basic metals remained at high levels.

For the first four months of the year, the CPI edged up 0.9 percent from a year earlier and the wholesale price index (WPI) rose 7.28 percent, the DGBAS said.
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