Inflation last month rose by a mild 1.59 percent from a year ago on the back of seasonal commodity price hikes for Lunar New Year celebrations, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.
Growth in the consumer price index, which had decelerated for five straight months since August, reversed last month as food vendors, hoteliers and shop owners raised prices over the Lunar New Year holiday, DGBAS section chief Wu Chao-ming (吳昭明) told a media briefing.
The inflationary measure climbed 1.21 percent in December and hit a 14-year high of 5.81 percent in July.
“Food costs rose 5.45 percent, driven by a 17.35 percent hike in vegetable prices and 15.24 percent increase in fishery products,” Wu said. “The housing sub-index climbed 2.45 percent, while the entertainment sub-indicator rose 1.75 percent.
Last month’s core CPI reading, which is used to track long-term inflation as the index excludes energy, fruit and vegetable prices, increased 2.59 percent from a year ago, the DGBAS report showed.
Wu said that inflationary pressures had ceased to be a threat.
“Though fuel prices have dropped substantially from last summer, raw materials cost more from a year earlier,” Wu said. “The trend of decelerating inflation remains solid.”
Growth in the wholesale price index slowed to a 33-year low of 10.43 percent year-on-year last month on continued shrinking raw material and basic metal costs, the report said.
Oil product and basic metal prices sank 33.45 percent and 20.59 percent respectively, the report said.
Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered Bank, said he agreed inflation was no longer a concern, although the bank had expected a smaller rise of 1 percent.
“In the absence of exceptionally bad news,” Phoo said the central bank was unlikely to cut interest rates this month.
But Kevin Hsiao (蕭正義), head of UBS Wealth Management Research in Taiwan, said the central bank could make another surprise rate cut if fourth-quarter figures showed that the global turmoil had taken a bigger toll on the local economy.
The DGBAS is scheduled to release the data on Feb. 19.
“The central bank may cut rates by another 25 to 50 basis points this month if exports and the GDP deteriorated faster than estimated,” Hsiao said by telephone.
“Taiwan could not have achieved a performance better than Singapore or South Korea whose economies contracted 3.7 percent and 3.4 percent each in the fourth quarter,” Hsiao said.
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