Taiwan’s consumer price index (CPI) could rise about 1.9 percent this year, if crude oil prices average US$100 a barrel, central bank Governor Yang Chin-long (楊金龍) said yesterday, signaling that price pressures remain broadly contained for the time being.
The central bank on March 19 raised its inflation forecast to 1.8 percent, assuming oil prices average US$85 per barrel and incorporating government measures to stabilize prices.
Speaking to the Legislative Yuan’s Finance Committee, Yang said the bank’s latest estimate aligns with the median forecast from major international institutions, even as Brent crude climbed above US$110 per barrel yesterday after Iran-backed Houthis fired missiles at Israel from Yemen.
Photo: Chen Yi-kuan, Taipei Times
Crude oil prices remain highly volatile and could fall to about US$70 per barrel if hostilities in the Middle East end quickly, the central bank governor said.
“Interest rates mainly address demand-driven inflation, whereas higher oil prices are a supply-side shock best managed through supply-side measures,” Yang said, adding that the central bank might tighten policy if it deems it necessary to tame inflation.
The government has mechanisms to cushion the impact of rising energy costs, including fuel and commodity price stabilization programs, he said.
The central bank would seek to maintain New Taiwan dollar’s exchange-rate stability to prevent imported inflation from adding to price pressures, but it does not set a specific defense line for the local currency, Yang said.
He said Taiwan could still expand more than 7 percent this year if the Middle East conflict proves short-lived and does not disrupt investment by US cloud service providers, a key driver of the nation’s export momentum.
Capital outflows triggered by the geopolitical tensions are normal after the local stock market recently hit record highs, he said.
Yang also commented on the government’s preferential housing loan program for first-home buyers, set to expire on July 31, saying that long loan grace periods can encourage lax financial planning.
“A slightly shorter grace period could foster more disciplined personal finance, benefiting borrowers and banks,” he said.
Currently, the program allows a five-year grace period, with 75 percent of borrowers using three-year terms, data from the Ministry of Finance showed.
Yang said the central bank would continue to update its projections for key economic indicators and policy stance as new data and geopolitical developments emerge, signaling a cautious, but measured approach to inflation and growth amid global uncertainties.
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