The central bank on Thursday raised its policy rate by 0.125 percentage points, which was contrary to a Bloomberg poll in which most analysts surveyed forecast no change. The unexpected rate hike came as inflation remains sticky, and the bank aims to drive it back toward its 2 percent target. Clearly, inflation remains a problem in Taiwan, especially core inflation, and people expect consumer prices to climb again after the government announced it would raise electricity rates next month.
The consumer price index (CPI) rose 2.74 percent in the first two months of the year from a year earlier, mainly due to the rising costs of food and dining out, as well as entertainment and rent, Directorate-General of Budget, Accounting and Statistics data showed. That is higher than the 2.60 percent increase in the fourth quarter of last year. Meanwhile, the core CPI — which excludes vegetable, fruit and energy prices — grew 2.77 percent over the two-month period, compared with a 2.85 percent rise in the fourth quarter.
Although raw material prices including crude oil are falling from their peak levels last year, easing the pressure of imported inflation, the central bank said that the resumption of normal activities after the lifting of most COVID-19 restrictions and the easing of a global outbreak of avian flu would increase the costs of entertainment and dining out, which tend to rise easily, but not go down.
Considering the stickiness of inflation in the services industry and the uncertainties about domestic prices for the rest of the year, the central bank on Thursday stressed the importance of containing inflation expectations and lifted its CPI forecast to 2.09 percent for this year, up from its previous estimate of 1.88 percent, but still lower than last year’s 2.95 percent.
The government has adopted several measures to help ease price increases, such as temporarily halting business taxes on imported corn, wheat and soybeans, halving import tariffs on butter and milk powder, reducing commodity taxes on gasoline and diesel, and investigating allegations of price gouging and hoarding in the food sector. Nevertheless, households could still face rising costs of living due to the spillover effect of higher electricity rates.
At a news conference after the bank’s quarterly board meeting on Thursday, central bank Governor Yang Chin-long (楊金龍) said the effects of higher electricity rates on CPI are definitely greater than that of rising egg prices.
He was correct that even if egg prices soared 30 or 40 percent, they would not constitute a high proportion of average household spending. However, rising electricity rates are bound to further spur inflation as businesses pass extra energy costs on to customers.
As the increase in electricity prices could have a wider influence on inflation due to its knock-on effects, the government should adopt timely measures to maintain balance in the supply and demand of goods, as well as halt electricity rate hikes for most households and small businesses.
As current price pressures are mainly from rising food, rental and services costs, Yang said the bank’s latest rate hike was appropriate and moderate. Rate decisions would remain data-dependent and could also factor in the lagged effect from the bank’s cumulative rate increases since March last year, the spillover effects of monetary tightening by other major economies, and the fallout from banking turmoil in the US and Europe, he said.
Given an expected deceleration in inflation buildup and increased growth risks, the central bank’s one-year-long rate hike cycle is likely nearing an end. Keeping GDP growth above 2 percent this year is another daunting challenge for policymakers as uncertainties in the global economy seem likely to persist in the near term.
US President Donald Trump and Chinese President Xi Jinping (習近平) were born under the sign of Gemini. Geminis are known for their intelligence, creativity, adaptability and flexibility. It is unlikely, then, that the trade conflict between the US and China would escalate into a catastrophic collision. It is more probable that both sides would seek a way to de-escalate, paving the way for a Trump-Xi summit that allows the global economy some breathing room. Practically speaking, China and the US have vulnerabilities, and a prolonged trade war would be damaging for both. In the US, the electoral system means that public opinion
In their recent op-ed “Trump Should Rein In Taiwan” in Foreign Policy magazine, Christopher Chivvis and Stephen Wertheim argued that the US should pressure President William Lai (賴清德) to “tone it down” to de-escalate tensions in the Taiwan Strait — as if Taiwan’s words are more of a threat to peace than Beijing’s actions. It is an old argument dressed up in new concern: that Washington must rein in Taipei to avoid war. However, this narrative gets it backward. Taiwan is not the problem; China is. Calls for a so-called “grand bargain” with Beijing — where the US pressures Taiwan into concessions
The term “assassin’s mace” originates from Chinese folklore, describing a concealed weapon used by a weaker hero to defeat a stronger adversary with an unexpected strike. In more general military parlance, the concept refers to an asymmetric capability that targets a critical vulnerability of an adversary. China has found its modern equivalent of the assassin’s mace with its high-altitude electromagnetic pulse (HEMP) weapons, which are nuclear warheads detonated at a high altitude, emitting intense electromagnetic radiation capable of disabling and destroying electronics. An assassin’s mace weapon possesses two essential characteristics: strategic surprise and the ability to neutralize a core dependency.
Chinese President and Chinese Communist Party (CCP) Chairman Xi Jinping (習近平) said in a politburo speech late last month that his party must protect the “bottom line” to prevent systemic threats. The tone of his address was grave, revealing deep anxieties about China’s current state of affairs. Essentially, what he worries most about is systemic threats to China’s normal development as a country. The US-China trade war has turned white hot: China’s export orders have plummeted, Chinese firms and enterprises are shutting up shop, and local debt risks are mounting daily, causing China’s economy to flag externally and hemorrhage internally. China’s
RSS