Taiwan’s headline inflation likely to have accelerated again in January

Taiwan’s consumer price inflation is expected to have accelerated in January. In the prior month, the CPI inflation had slowed to 1.7 percent year-on-year in from November’s 2 percent year-on-year. The deceleration was mainly due to weaker food prices. According to a Societe Generale research report, inflation in Taiwan is likely to have accelerated again to 2.4 percent year-on-year, mostly driven by a solid positive base effect caused by the shifting Lunar New Year.

Lunar New Year arrived earlier in 2017 in the last week of January as compared to early February in 2016. Therefore, food and gift prices are expected to have increased in late January and then normalise downwards in the following month.

In the meantime, energy price inflation is expected to have accelerated as crude oil prices increased. Given the weak wage growth and a negative output gap, there might be contained inflationary pressures in the near term.

“Core CPI inflation should remain at around 1%, offering room for the central bank to keep their policy rates at current accommodative levels (discount rate at 1.375%)”, added Societe Generale.