Taiwan’s CPI inflation to further slowdown in coming months

Taiwan’s inflation decelerated for the second straight month in April, slowing to 1.9% y/y. It was 0.5 percentage points below February’s peak level of 2.4%. Food prices growth slowed to 8%, as compared with the 8.5% growth seen in the prior two months. Meanwhile, the country’s core inflation reached 0.9% in April.

Given the present rate of normalization, food price inflation is likely to take a longer time than anticipated to subside totally, according to DBS. CPI inflation is likely to further decelerate in the following months, added DBS Bank. The headline inflation figure is likely to slip back to 1% only during the end of second quarter and start of third quarter, noted DBS Bank. In contrast to a considerably negative output gap, there continues to be a possibility that the central bank will lower rates during its policy meeting in June.

“We look for a 12.5bps cut in the benchmark discount rate”, said DBS Bank.