Tue, Jan 06, 2009 - Page 12 News List

Inflationary pressures subside, DGBAS reports

DELAY The wholesale price index plunged 9.11 percent, but the agency said retailers would take at least six months to reflect the cost adjustments

By Crystal Hsu  /  STAFF REPORTER

The nation’s inflationary pressures subsided last month, with the consumer price gauge decelerating to a 17-month low of 1.21 percent, bringing the yearly inflation rate to 3.52 percent mainly on surging fuel and food costs last summer, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.

The downshifts are expected to persist this year, giving monetary authorities more room to cut interest rates to galvanize economic activity at home amid the global economic crisis, analysts said.

“The [seasonally adjusted] consumer price index gained 1.21 percent year-on-year in December, the smallest hike since August 2007,” DGBAS section chief Wu Chao-ming (吳昭明) said at a media briefing. “The measure declined 1.85 percent from a month earlier, owing to sustained drops in oil and raw material costs.”

The inflation rate stood at 3.52 percent last year, driven chiefly by soaring fuel and food prices in the first half, Wu said, adding that prices retreated drastically in the second half on falling demand amid the financial market turmoil.

The core consumer price index (CPI), which is used to track long-term inflation as the index excludes energy, fruit and vegetable prices, dipped 0.21 percent last month on falling prices across the board, the DGBAS report showed. The annual core CPI rose 3.07 percent, the highest since 1997.

Meanwhile, the wholesale price index plunged 9.11 percent from the previous year, but Wu said it would take six months for retailers to reflect the cost adjustments, if they do so at all.

Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered Bank, said the easing inflationary pressures would give the central bank greater leeway to lower interest rates and boost private consumption.

“As oil and raw material prices are unlikely to pick up, the CPI is bound to remain low, giving the central bank a free hand to cut interest rates in fighting recession,” Phoo said by telephone.

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