Taiwan’s inflation remains controllable and would decline to the central bank’s target territory next year, central bank Governor Yang Chin-long (楊金龍) said yesterday.
Global supply chain disruptions, energy and raw material prices hikes, and the local currency’s depreciation have played a part in inflation’s rise in Taiwan, Yang said during a speech at Academia Sinica in Taipei’s Nangang District (南港).
The central bank has set an inflation target of 2 percent to keep consumer prices low and stable.
Photo: CNA
The bank in September forecast that the consumer price index (CPI) would grow 1.88 percent next year, slightly higher than the 1.86 percent the Directorate-General of Budget, Accounting and Statistics projected yesterday afternoon.
Inflation has hovered around 3 percent in the past few months.
Yang said global supply chain snarls during the COVID-19 pandemic pushed up energy and raw material prices, and the situation deteriorated earlier this year after Russia’s invasion of Ukraine.
Taiwan, which relies heavily on imported energy and raw materials, is susceptible to price movements, he said.
Imported inflation became more evident amid the depreciation of the local currency, Yang said.
The average price of imported goods last month grew 11.17 percent in US dollar terms, but spiked 17.1 percent in New Taiwan dollar terms, because the local currency has fallen 5 percent against the greenback this year, he said.
The NT dollar is expected to fall 6 percent against the US dollar this year, which would contribute 0.15 to 0.3 percentage points to the CPI, which would be tolerable, Yang said.
Government agencies have assisted by cutting taxes on imported energy and raw materials, and had earlier frozen electricity prices, he said.
The central bank has predicted that GDP would grow 2.99 percent next year and is to update its forecast next month.
International research bodies have said the US and Europe might enter recession next year, facilitated by drastic monetary tightening.
Yang said he is not sure if stagflation would occur as it did during the oil crisis in the 1970s, but conceded that there are tough challenges ahead.
The US Federal Reserve has said that it would raise interest rates further to bring inflation down to 2 percent, from 7.7 percent, even at the cost of job losses and economic pain.
Such a drastic move is not necessary in Taiwan in light of controllable inflation, Yang said, adding that the central bank would make policy decisions based on the nation’s needs.
Yang in September said that the central bank could press ahead with, slow down or halt monetary tightening next month after factoring in the latest economic data.
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