Taiwan’s CPI inflation eases in August on negative base effect

As widely expected, Taiwan’s consumer price index inflation eased in August, following a rise in the previous month, mainly because of negative base effect. The island’s inflation slowed to 0.57 percent year-on-year in August, after accelerating to 1.23 percent in July. The export orders declined in the nation in July for the 16th consecutive month, shrinking 3.45 percent year-on-year after a 2.4 percent fall in June.

Benign inflation outlook is likely to provide scope for additional easing, said Scotiabank in a research note. The Taiwanese central bank is expected to cut its interest rate further by another 12.5 basis points in September as continuously declining export orders exert downward pressure on the island’s economic growth.

On the foreign exchange front, the Taiwanese dollar has been running a tight correlation with local shares since the beginning of 2015 and might continue to be susceptible to the developments in Fed speeches and U.S. economic data in the coming weeks, noted Scotiabank. In September, the currency pair, USD/TWD is expected to trade between 31.00 and 32.00, added Scotiabank.