| Actual | Previous | |
|---|---|---|
| Month over Month | 0.39% | 0.16% |
| Year over Year | 3.04% | 2.71% |
Highlights
Taiwan's headline consumer price index rose 0.39 percent on the month in January after an increase of 0.16 percent in December, with the year-over-year increase picking up from 2.71 percent to 3.04 percent. Core CPI inflation, which excludes fruits, vegetables, and energy prices, rose from 2.60 percent to 2.98 percent.
Taiwan's central bank, the Central Bank of China, increased its benchmark discount rate from 1.625 percent to 1.75 percent at its most recent quarterly policy meeting mid-December. Relative to forecasts made in September, officials revised down their forecast for 2023 GDP growth from 2.90 percent to 2.53 percent. They also forecast headline inflation to average 1.88 percent in 2023, below their target of 2.0 percent, with core inflation forecast to average 1.87 percent. Officials provided little guidance on the likelihood of additional policy tightening in coming months but merely noted that adjustments will be made if considered warranted.
Taiwan's central bank, the Central Bank of China, increased its benchmark discount rate from 1.625 percent to 1.75 percent at its most recent quarterly policy meeting mid-December. Relative to forecasts made in September, officials revised down their forecast for 2023 GDP growth from 2.90 percent to 2.53 percent. They also forecast headline inflation to average 1.88 percent in 2023, below their target of 2.0 percent, with core inflation forecast to average 1.87 percent. Officials provided little guidance on the likelihood of additional policy tightening in coming months but merely noted that adjustments will be made if considered warranted.
Definition
The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Annual changes in the CPI represent the rate of inflation.
Description
An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from mortgages and auto loans to government securities. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
Inflation (along with various risks) basically explains how interest rates are set on everything from mortgages and auto loans to government securities. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
