The nation’s inflationary pressures eased last month, though food costs continued to rise despite a sharp decline in fuel prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.
The consumer price index (CPI) gained 0.86 percent last month from a year earlier, slowing from a revised 1.06 percent in October, driven primarily by meat, egg and fishery product price hikes, the statistics agency said in a report.
Analysts said that the lower-than-expected reading for last month would allow the central bank room to postpone raising interest rates.
DGBAS Deputy Director Tsai Yu-tai (蔡鈺泰) said he does not see any sign of deflation on the horizon, even though research institutes at home and abroad expect energy prices to drop further next year.
The core CPI — which is more reliable in tracking long-term inflationary trends because it excludes volatile vegetable and energy costs — grew 1.4 percent year-on-year last month, from a revised 1.6 percent in October, the report said, suggesting stable and benign inflationary pressures.
The sub-index on the food category rose 3.65 percent on the back of steep rises in egg, meat and fishery product prices, although vegetable prices softened 1.39 percent, the report showed.
OTHER FACTORS
A low base last year helped elevate the sub-index, but it could taper off in coming months.
Dining costs, which account for nearly 10 percent of CPI weight, rose 4.4 percent last month, advancing faster than 4 percent for five consecutive months, the agency said, as Taiwanese like to eat out.
Meanwhile, fuel prices slumped 11.43 percent, the biggest drop in 63 months, dragging the sub-index on transportation and communications costs down by 2.52 percent, the report said.
Lower energy costs are favorable for the economy, as every 10 percent drop in oil prices can raise GDP growth by 0.26 percentage points and bring down consumer prices by 0.37 percentage points, on the condition the fall is caused by oversupply rather than slack demand, the DGBAS said last week.
For the first 11 months, CPI grew 1.26 percent, the report said.
IN PERSPECTIVE
The wholesale price index, a measure of production costs, declined by 2.63 percent from a year earlier, widening from a revised 1.3 percent retreat in October, as raw material prices continued to fall, the report said.
For the first 11 months, the reading edged down 0.78 percent, it added.
The ebbing inflationary pressures might lead the central bank to slow the pace at which it normalizes its policy rates, Singapore-based Barclays senior economist Leong Wai Ho (梁偉豪) said in a research note.
“While we continue to expect the CBC [Central Bank of the Republic of China] to gradually reduce its support for the economy in the months ahead, it could normalize at a slower pace than we expected earlier,” Leong said.
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