Tue, Apr 08, 2008 page12

• CPI climbs 3.96% from a year ago

  SOME UP, SOME DOWN While the CPI climbed from the same month last year, it dropped from the February figure because of a more abundant supply of fruits and vegetables

  • By Jerry Lin And Kevin Chen / STAFF REPORTER
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  The consumer price index (CPI) climbed 3.96 percent last month from a year ago, to 103.12, mainly because of an increase in food prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.

  Last month’s reading, however, dropped 1.07 percent from the February figure, as a result of the abundant supply of fruits and vegetables in the markets, DGBAS data showed.

  The core CPI, which excludes food and fuel prices, rose 3.07 percent year-on-year last month, making it the sixth consecutive month that the core CPI reading exceeded 2 percent.

  “The increase of core CPI last month was the highest since March 1999,” DGBAS section chief Wu Chao-ming (吳昭明), said at a press briefing yesterday. The core CPI surged to 3.28 percent in February 1999 owing to an increase in demand during the Lunar New Year, he said.

  The wholesale price index (WPI) rose 7.15 percent year-on-year last month, to 110.38, on the back of the soaring international commodity prices, Wu said, citing that the average OPEC crude oil prices surged as high as 95 percent from US$58 in January last year to US$99 per barrel last month.

  “If the nation’s fuel and electricity prices both increase 10 percent this year [starting from January], it would in turn increase CPI by 0.33 percent and 0.2 percent year-on-year respectively,” Wu said.

  But if prices were adjusted after May 20 when the new administration takes office, the impact would be cut in half, he said.

  The import price index rose 11.84 percent year-on-year last month in NT dollar terms, DGBAS data showed.

  Tony Phoo (符銘財), chief economist of Standard Chartered Bank, said yesterday that food prices will likely decrease starting in July, which will help ease domestic inflationary pressures.

  However, Phoo said he was concerned about the impact of future fuel and utility price hikes, as their ripple effects are hard to estimate.

  “If the new government did raise fuel and utility prices all at once after May 20, DGBAS’ previous forecast of a 2 percent average CPI for the whole year would be hard to achieve,” Phoo said by telephone yesterday.

  DGBAS forecasted earlier last month that while the CPI will remain as high as 3 percent in the first half of this year, the average CPI for the whole year will likely drop to 2 percent.

  Citigroup economists said the March inflation numbers were a bit weaker than expected and could still pose a concern for the monetary policymakers to lift its benchmark interest rates again in its next quarterly board meeting. The central bank announced it would raise its rediscount rate — the 15th quarterly increase since October 2004 — to 3.50 percent in a board meeting on March 27.

  “The elevated inflation readings and surging import cost pressures will likely support the central bank in raising rates another 12.5 basis points in June as the economic outlook becomes clearer,” Citigroup Investment Research economists Cheng Cheng-mount (鄭貞茂) and Tina Liao wrote in a note to its clients yesterday.

  With high headline CPI inflation and core CPI inflation hovering around a nine-year high, the inflation problem appears to be becoming increasingly broad based, Moody’s economist Alistair Chan said yesterday.

  “Policy-makers must be on the watch for [inflation] to start filtering into increased wage demands,” the Sydney-based economist at Moody’s Economy.com wrote in a statement posted on its Web site.

  But, despite the rising inflationary pressure on the back of high oil and commodity prices, Deutsche Bank said that it expects this to be the end of the central bank’s rate hikes.

  “[We] expect the central bank to start cutting rates by the third quarter mainly on concern regarding downside risk to growth,” Deutsche Bank said in an email to the Taipei Times yesterday.
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