Taiwan’s consumer inflation cooled significantly in August, taking some of the pressure off the central bank as it tries to balance raising interest rates against the need to support the economy.
(Bloomberg) — Taiwan’s consumer inflation cooled significantly in August, taking some of the pressure off the central bank as it tries to balance raising interest rates against the need to support the economy.
The consumer price index rose 2.66% from a year earlier, according to Taiwan’s Directorate General of Budget, Accounting & Statistics on Tuesday. That was slower than July’s increase of 3.36%. Economists had expected consumer inflation to moderate somewhat to 3.14%.
It was also the first time in half a year that CPI was less than 3%. Earlier this summer CPI reached the highest level in 14 years with officials later raising their full-year forecast for inflation to 2.92%. Consumer prices had not risen that fast since the global financial crisis in 2008, when inflation hit 3.52%.
Officials pointed to steep declines in the prices of vegetables and communications equipment as the main reasons for the slowdown. Core CPI, which excludes volatile food and gas prices, held steady at 2.73%.
“Looking forward, inflation is likely to fall further this month along with the decline in raw-material prices and slowing global demand,” Johnny Chiang, an economist at Taipei-based Masterlink Securities Investment Advisory Corp., said via telephone. “CPI likely peaked in June and we probably won’t see inflation above 3% for the rest of the year.”
Slowing price rises could give the government some breathing room as it faces economic pressure elsewhere. Demand from China and the rest of the world has slowed significantly, weighing on trade: Taiwan’s export orders unexpectedly contracted in July, led by a massive falloff in orders from China and Hong Kong, which combined are the second-largest source of demand after the US.
Read More: Factory Slowdown in Europe and Asia Is Warning for Global Trade
Taiwan’s purchasing managers index, meanwhile, fell last month to its lowest level since 2020, indicating manufacturers are feeling a squeeze.
Taiwan last raised interest rates in June by a smaller-than-expected amount as the central bank sought to rein in inflation without exacerbating slowing growth. Policy makers next meet later this month.
Last month, Taiwanese officials cut their forecast for 2022 gross domestic product growth to 3.76%, the second reduction this year, as inflation, slowing electronics demand and geopolitical pressure from China clouded the outlook.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
