Taiwan: Inflation inches up in March
April 7, 2011
In March, consumer prices dropped 0.87% over the previous month, contrasting the 0.76% increase recorded in February. The monthly fall was mainly due to a plunge in prices for household operations (-27.9% month-on-month) and entertainment expenses (-4.2% mom), as the effects of the Chinese New Year's Festival, which boosted these prices in February, faded. In spite of the pronounced price drop in March, annual headline inflation inched up from 1.3% in February to 1.4% and undershot market expectations of 1.7%. Meanwhile, the core inflation index, which excludes volatile categories such as fresh food and energy, decreased 0.93% over the previous month. Nevertheless, annual core inflation inched up to 1.0% from 0.8% in February, and annual average headline inflation was unchanged at February's 1.0%. The Central Bank raised the discount rate at its latest quarterly policy meeting held on 31 March, in a move widely expected by market analysts. The Bank lifted the policy rate by 12.5 basis points to 1.75%, claiming that the economy was performing better than expected amid strong exports and investment. In addition, the higher rate should curb asset-price inflation, particularly in the real estate sector. The government expects inflation to average 2.0% in 2011.