The consumer price index (CPI) declined 0.45 percent year-on-year last month as the effect of a decline in global crude prices outweighed a slight rise in domestic vegetable prices following Typhoon Soudelor, statistics released yesterday show.
“Fuel prices dropped 27.4 percent year-on-year last month, and have fallen more than 20 percent for the ninth consecutive month, which has depressed the inflationary gauge by 1 percentage point,” Directorate-General of Budget, Accounting and Statistics (DGBAS) Deputy Director Tsai Yu-tai (蔡鈺泰) told reporters at a news conference.
After seasonal adjustments, the CPI registered a 0.09 percent rise last month, while core CPI — a more reliable inflationary reference because it excludes volatile items — grew a moderate 0.61 percent, DGBAS statistics show.
The fall in the price of crude reduced transportation and communication costs by 6.69 percent and household living costs by 1.12 percent last month, the DGBAS said.
That more than offset a 3.07 percent increase in food costs last month, when vegetable and fruit prices climbed 14.07 percent and 4.62 percent respectively due to the effects of Typhoon Soudelor on Aug. 7 and 8.
In the first eight months of this year, the CPI contracted 0.62 percent and it is predicted to stay in negative territory for the rest of the year, as crude prices have yet to see a sustained rebound, the DGBAS said.
The wholesale price index (WPI), a measure of commercial production costs, retreated 9.23 percent last month, its steepest fall for August in six years, as basic metal and chemical prices continued to head south.
From January through last month, the WPI declined 9.15 percent year-on-year and it is unlikely to bounce bank in the foreseeable future given falling international crude and raw material prices, the agency said.
Poor economic fundamentals are feeding market speculation that the central bank plans to cut interest rates cuts later this month, analysts said.
However, Hong Kong-based ANZ senior economist Raymond Yeung (楊宇霆) predicted that the central bank would hold policy rates unchanged at its policy meeting on Sept. 24.
The central bank would maintain an accommodative stance through open-market operations, as the overnight interest rate has dropped from 0.38 percent to 0.32 percent, and the average yield for the latest auction of 364-day negotiable certificates of deposit is 0.447 percent, the lowest since 2010, Yeung said.
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