Consumer price index predicted to slow this year

By Amy Su  /  Staff reporter

Wed, Jan 09, 2013 - Page 14

National inflationary pressure may be benign this year, with the consumer price index’s (CPI) annual growth hitting the highest level of the year in the first quarter before slowing for the rest of the year, a foreign brokerage house said in a report yesterday.

The Directorate-General of Budget, Accounting and Statistics (DGBAS) on Monday announced that Taiwan’s headline inflation had risen 1.93 percent last year, its highest growth rate since 2008.

However, Barclays Capital said that annual CPI inflation growth would slow to 1.5 percent this year on the back of more neutral weather patterns in Asia, in contrast to the extreme El Nino conditions seen earlier last year.

“However, the trajectory will be uneven,” Barclays Capital economist Leong Wai Ho (梁偉豪) said in a research note.

The brokerage expects headline inflation to climb back above 2.5 percent next month due to the seasonal pickup in demand over the Lunar New Year holidays, Leong said.

On a quarterly basis, Leong said headline inflation may climb to 2.2 percent in the first quarter — above the 1.8 percent recorded in the fourth quarter last year — before falling below 2 percent for the remainder of the year.

Given the mild pace of growth in headline inflation, the brokerage said the central bank will have continue to provide incremental support to the economy by injecting liquidity, with the current policy interest rates of 1.875 percent already at a low level.

Leong added. that the central bank would be inclined to keep the overnight rate steady at about 0.38 percent for most of the year to support the economic recovery.