Fri, Sep 07, 2012 - Page 14 News List

Research group predicts price increases will abate

SUNNY HORIZONS?Meteorologists have forecast calm weather that should lead to a drop in food prices, but researchers are wary of external upward pressures

Staff writer, with CNA

Private think tank Polaris Research Institute (寶華綜合經濟研究院) said yesterday the increase in consumer prices is expected to slow down to some extent and fall below the 3 percent mark this month.

Polaris Research said this month’s consumer price index (CPI) could grow by a range between 2.6 percent and 2.7 percent, down from an increase of 3.42 percent last month, as weather forecasters have not indicated that typhoons will hit the island during the month. However, the 2.6 percent to 2.7 percent hike remains high and will impose inflationary pressure on the local economy, the Taipei-based think tank said.

On Wednesday, the Directorate-General of Budget, Accounting and Statistics reported last month’s CPI growth hit the highest level in four years on a jump in food prices as torrential rains brought by successive typhoons damaged harvests.

In the month, vegetable prices surged 57.93 percent and fruit prices soared 20.14 percent from a year earlier to boost food prices as a whole by 8.66 percent, the statistics agency said in a report.

The previous high of 4.68 percent in the CPI hike was seen in August 2008 as a result of rising international crude oil prices and growing agricultural prices at that time.

Despite the stable weather conditions expected for this month, Polaris Research said price increases for eggs, dairy goods and fisheries products are likely to remain high based on a relatively low comparison base for the same period last year, while recent gas price hikes are expected to contribute to the CPI increase.

The think tank said that as the market has embraced high hopes that the US Federal Reserve will launch a third round of quantitative easing, international crude oil prices are expected to stay high, which will add upward pressure on local consumer prices this month.

In June, Polaris Research forecast the CPI would rise 1.9 percent this year from a year earlier, while the institute cut its estimate of Taiwan’s GDP growth to 2.5 percent from 3.88 percent.

The think tank said it would release a revision of this year’s GDP growth forecast and CPI forecast later this month.

Meanwhile, Christiaan Tuntono, a Hong Kong-based economist at Credit Suisse, said yesterday that the surge in Taiwan’s headline inflation is likely to constrain any move by the central bank to ease monetary conditions at this juncture.

The central bank is scheduled to hold its quarterly board meeting on Sept. 20, at a time when a weakening economy and tamed core price pressure have increasingly placed pressure on the monetary policymaker to consider an interest rate cut.

“However, we think any symbolic cut in the rediscount rate, if ever implemented, would need to wait until the spike in vegetable prices passes, in the fourth quarter,” Tuntono said in a report.

“In our view, the precondition for any rate cut by the central bank is that it would need to see further downside risk on growth and feel comfortable about the outlook on inflation and speculative pressure in the economy,” he said.

Additional reporting by Kevin Chen

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