Central bank Governor Yang Chin-long (楊金龍) yesterday indicated that inflation is becoming less of a concern for Taiwan’s economy, comments that come a week before a key decision on interest rates by the monetary policymaker and also ahead of the Directorate-General of Budget, Accounting and Statistics (DGBAS) releasing inflation data for last month.
The consumer price index (CPI) last month rose 2.24 percent from a year earlier, accelerating from a revised 1.94 percent increase in April, the DGBAS reported yesterday.
“CPI, core CPI, important staples prices and prices of commonly purchased items are gradually falling,” Yang told lawmakers during a regular question-and-answer session at a meeting of the Finance Committee at the legislature in Taipei. “The economy is recovering, but it’s not very strong.”
Photo: Liao Chen-hui, Taipei Times
The central bank would take into account global monetary policy conditions when it sets interest rates, Yang said.
Those remarks came as Canada took the lead in G7 nations cutting rates.
Taiwan’s interest-rate swaps (IRS) — a measure of trader expectations for rate hikes — fell after Yang’s remarks.
The three-year IRS dropped as much as 5.5 basis points, the most since late March.
In March, the central bank unexpectedly raised its benchmark interest rate to the highest since 2008.
Yang said at the time that “inflation has been high since 2021” and singled out concern over electricity costs.
Asked by lawmakers if the central bank would make yet another surprise next week, Yang yesterday said: “It’s not good to give surprises from time to time,” remarks that seemed to imply that the central bank might stay put this time.
Lawmakers also asked Yang if the central bank would raise rates or further tighten credit control measures for real-estate financing to battle rising housing prices.
Yang said that interest rates would not be used to influence property prices and that central bank board members would look into the property issue at a quarterly policymaking meeting on Thursday next week.
Climbing home prices are a lingering concern.
Earlier this week, the Chinese-language Commercial Times reported that some commercial lenders think the central bank might tighten mortgage lending rules at next week’s meeting.
The central bank has introduced several rounds of selective credit controls on local banks since December 2020 to cool the property market and rein in rising housing prices.
While Taiwan expects the economy to grow this year at the fastest pace since 2021, inflation has been a key concern for policymakers and the public.
Although the pace of price gains has been low compared with elsewhere in the world, even slower wage gains has meant the erosion of household earnings.
Last week, the DGBAS upgraded its GDP and CPI growth estimates for this year to 3.94 percent and 2.07 percent respectively, up from 3.43 percent and 1.85 percent it projected earlier.
The bank is expected to adjust upward its economic growth and inflation forecast next week as well.
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