Taiwan's headline consumer price index rose 0.15 percent on the month in February after advancing 0.21 percent in January, with the year-over-year increase accelerating from 1.79 percent to 3.08 percent. This increase in inflation partly reflects the timing of lunar new year holidays, which occurred in January last year but occurred in February this year. This means that the price index was somewhat higher in February 2024 than it otherwise would have been. Core CPI, which excludes fruits, vegetables, and energy prices, rose 0.79 percent on the month in February after increasing 0.11 percent in January, with the year-over-year increase picking up from 1.49 percent to 2.90 percent.

Taiwan's central bank, the Central Bank of China, left the benchmark discount rate unchanged at 1.875 percent at their quarterly policy meeting mid-December. Officials expect price pressures to moderate further over the coming year, with annual headline inflation forecast to fall to 1.89 percent in 2024 and annual core inflation forecast to fall to 1.83 percent. The next policy meeting is scheduled to be held later this month.

Consumer prices in February are expected to rise to 2.5 percent versus a 1.79 percent year-over-year rate in January that was much lower than the 2.2 percent consensus.

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.