| Actual | Previous | Consensus | |
|---|---|---|---|
| Month over Month | 0.10% | 0.26% | |
| Year over Year | 1.95% | 2.14% | 2.10% |
Highlights
Consumer prices edged up just 0.1 percent on the month in April, well short of the 0.26 percent increase in March. The advance was small enough to trim the yearly inflation rate from 2.14 percent to 1.95 percent, short of the market consensus and back below 2.0 percent for the first time since January. Core inflation, which excludes fruits, vegetables, and energy prices, was 1.81 percent, down from 2.13 percent in March and 2.90 percent in February.
The sensitivity of the Central Bank of the Republic of China (Taiwan) to inflationary pressures was reflected in its unexpected decision to increase its main policy rate by 12.5 basis points to 2.00 percent in March. However, the central bank has already said that it expects both the headline and core rates to exceed 2 percent this year. Consequently, the April decline in both measures should be well received and should reduce the likelihood of any additional near-term tightening.
The sensitivity of the Central Bank of the Republic of China (Taiwan) to inflationary pressures was reflected in its unexpected decision to increase its main policy rate by 12.5 basis points to 2.00 percent in March. However, the central bank has already said that it expects both the headline and core rates to exceed 2 percent this year. Consequently, the April decline in both measures should be well received and should reduce the likelihood of any additional near-term tightening.
Market Consensus Before Announcement
Consumer prices in April are expected to rise 2.10 percent versus a 2.14 percent year-over-year rate in March.
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.
