Taiwan Inflation Rate Declines on Cheaper Fuel Prices

By Chinmei Sung

Sept. 5 (Bloomberg) -- Taiwan's inflation eased from an almost 14-year high in August as fuel prices fell, the government said in a report today.

Consumer prices climbed 4.78 percent from a year earlier, the state statistics bureau said in Taipei. That was less than the 5 percent median estimate in a Bloomberg News survey of 19 economists. Prices rose a revised 5.91 percent in July, the fastest pace since September 1994.

Inflation may not have slowed enough to deter the central bank from raising interest rates later this month, joining other Asian policy makers in raising borrowing costs this year to tame soaring oil and food prices even as global growth falters.

``A 4 percent inflation rate would still be the highest in more than 10 years,'' said Chuang Rehong, an economist at SinoPac Financial Holdings Co. ``The central bank will make a pre-emptive move to eliminate any inflation concerns.''

Taiwan's central bank on June 26 increased its benchmark interest rate for the 16th-consecutive quarter to 3.625 percent, the highest in seven years, and said its first priority was to contain inflation. It may raise the rate at least another 0.125 percentage point this year, Chuang said.

Taiwan's consumer prices gained an average 4.25 percent in the first eight months of 2008, compared with 1.8 percent for all of last year.

The statistics bureau last month raised its 2008 inflation forecast to 3.74 percent, which would be the fastest pace since 1994, from a May projection of 3.29 percent and a February estimate of 1.98 percent.

Room to Ease

``As economic growth slows and commodity prices ease in the coming months, price pressures should begin to cool, giving the monetary authorities some room to ease off the tightening cycle,'' said Frederic Neumann, an economist at HSBC Holdings Plc in Hong Kong.

CPC Corp., Taiwan's state-owned oil refiner, cut gasoline prices for three consecutive weeks in August as crude fell from a July 11 record of $147.27 a barrel.

Food prices rose 10.21 percent last month after rising 13.61 percent in July. Housing costs increased 2.33 percent and the price of transportation climbed 5.4 percent.

Core consumer prices, a category excluding vegetables, fruits, fish and energy, rose 3.74 percent after climbing 4.06 percent in July.

Import prices increased 14.92 percent from a year earlier, and wholesale prices rose 9.57 percent.

To contact the reporter on this story: Chinmei Sung in Taipei at csung4@bloomberg.net.