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Taiwan inflation rate forecast to rise 1.2% in 2014: Merrill Lynch

TAIPEI--Taiwan's consumer price index (CPI) for 2014 is forecast to rise no more than 1.2 percent despite a higher-than expected increase in January, according to Bank of America Merrill Lynch.

Government statistics released Thursday showed that Taiwan's CPI for January rose 0.76 percent year-on year, higher than Merrill Lynch's projection of 0.6 percent.

The CPI growth last month reflected higher demand for fish and meat products ahead of and during the Lunar New Year holiday, which started Jan. 30 and ended Feb. 4, the statistics indicated.

Marcella Chow, a Hong Kong-based economist at Merrill Lynch, said that because the holiday started on Jan. 30 this year compared with Feb. 9 last year, it created a seasonal impact on food prices last month and a distorted base effect.

The CPI will likely moderate in February as food prices usually rise before the Lunar New Year and normalize afterwards, Chow said.

“Looking ahead, inflation pressure will probably remain low, averaging 1.2 percent year-on-year in 2014, leading the Central Bank of the Republic of China (Taiwan) to keep the policy rate on hold for at least the first few months of the year to support GDP growth,” she wrote in a note to clients on Thursday.

The estimated CPI growth for this year would be higher than the 0.8 percent in 2013 but below the 1.9 percent in 2012 and 1.4 percent in 2011, she said.

According to government statistics, Taiwan's food prices in January were up 1.02 percent year-on-year, with fish and meat prices rising 9.12 percent and 5.95 percent, respectively, in reflection of strong seasonal demand.

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