| Actual | Previous | |
|---|---|---|
| Month over Month | 0.20% | 0.10% |
| Year over Year | 2.24% | 1.95% |
Highlights
Taiwan's headline consumer price index rose 0.20 percent on the month in May after an increase of 0.10 percent in April, with the year-over-year increase increasing from 1.95 percent to 2.24 percent. Core CPI, which excludes fruits, vegetables, and energy prices, fell 0.01 percent on the month in May after increasing 0.57 percent in April, with the year-over-year increase picking up slightly from 1.81 percent to 1.84 percent.
The Central Bank of the Republic of China (Taiwan) increased its main policy rate by 12.5 basis points from 1.875 percent to 2.00 percent at its quarterly policy meeting mid-March. This was the first increase in the rate in twelve months and takes the rate to its highest level since 2008. Although officials expect inflation will trend lower this year, they expressed concerns that price pressures have remained too strong and that a proposed increase in domestic electricity prices this month could boost inflation expectations. The next policy meeting will be held next week.
The Central Bank of the Republic of China (Taiwan) increased its main policy rate by 12.5 basis points from 1.875 percent to 2.00 percent at its quarterly policy meeting mid-March. This was the first increase in the rate in twelve months and takes the rate to its highest level since 2008. Although officials expect inflation will trend lower this year, they expressed concerns that price pressures have remained too strong and that a proposed increase in domestic electricity prices this month could boost inflation expectations. The next policy meeting will be held next week.
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.
