Taiwan's headline consumer price index rose 0.21 percent on the month in January after advancing 0.29 percent in December, with the year-over-year increase decelerating from 2.71 percent to 1.79 percent. This decline in inflation partly reflects the timing of lunar new year holidays, which occurred in January last year but occurs in February this year. This means that the price index was somewhat higher in January 2023 than it otherwise would have been, so that the year-over-year increase in the index in January 2024 is somewhat lower.

Fruit prices increased on the month in January but vegetable prices fell as supply recovered from adverse weather conditions. Core CPI, which excludes fruits, vegetables, and energy prices, rose 0.11 percent on the month in January after falling 0.12 percent in December, with the year-over-year increase slowing from 2.43 percent to 1.49 percent.

Taiwan's central bank, the Central Bank of China, left the benchmark discount rate unchanged at 1.875 percent at its quarterly policy meeting mid-December. Officials see headline inflation at 1.89 percent in 2024 and annual core inflation at 1.83 percent.

Consumer inflation in Taiwan is expected to ease further to 2.20 percent in January from 2.71 percent in December and 2.90 percent in November.

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.

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.