Taiwan’s Inflation Slowed to Eleven-Month Low in January

Taiwan’s inflation slowed the most in nearly a year, increasing the central bank’s scope to hold interest rates to boost growth.

Consumer prices rose 1.15 percent in January from a year earlier, after climbing a revised 1.6 percent in December, the statistics bureau said in Taipei today. The median of 15 estimates in a Bloomberg News survey was 1.4 percent.

The easing supports central bank Governor Perng Fai-Nan’s decision to hold the benchmark rate at 1.875 percent in December after inflation slowed from a four-year peak in August. Perng begins a fourth five-year term at the end of the month, with data last week showing the economy expanded more than estimated in the fourth quarter as exports recovered.

“As the output gap will remain negative in the next one to two quarters, inflation will remain benign,” Ma Tieying, a Singapore-based economist at DBS Group Holdings Ltd., said before the report. “The central bank will be allowed to keep monetary policy accommodative.”

The Lunar New Year celebration, which typically drives up costs of food and clothing, was in January last year. It is being observed in February this year.

The January consumer-price index reflects a base-year change from 2006 to 2011, according to a statistics bureau statement. Transport and medical care are weighted more heavily, while food and housing now have a lower weighting, it showed.

The Taiwan dollar was little changed at NT$29.557 against its U.S. counterpart as of 10:16 a.m. in Taipei. The currency has weakened 1.7 percent this year.

Core consumer prices, a category excluding vegetables, fruits, fish and energy, advanced 0.33 percent from a year earlier, the report showed. Wholesale prices, which track the cost of goods sold to retailers and producers, fell 3.81 percent.

Before it's here, it's on the Bloomberg Terminal.