Taiwan's headline consumer price index rose 0.19 percent on the month in July after an increase of 0.31 percent in June, with the year-over-year increase increasing from 2.42 percent to 2.52 percent. Vegetable prices rose strongly on the month after extreme weather events. Core CPI, which excludes fruits, vegetables, and energy prices, rose 0.12 percent on the month in July after falling 0.01 percent in June, with the year-over-year increase up slightly from 1.83 percent to 1.84 percent.

The Central Bank of the Republic of China (Taiwan) left its main policy rate unchanged at 2.00 percent at its quarterly policy meeting mid-June. This followed an increase at its previous meeting in March which took the rate to its highest level since 2008. Forecasts published at the June meeting showed that officials were more confident that price pressures would moderate in the near-term, with their forecast for annual headline inflation in 2024 revised down from 2.49 percent to 2.12 percent and their forecast for annual core inflation revised down from 2.58 percent to 2.00 percent. Reflecting this assessment, officials concluded that current policy settings remained appropriate.

Consumer inflation in Taiwan is expected to accelerate further to 2.50 percent in July after rising to 2.42 percent in June from 2.24 percent in May. It would remain the highest since February when the CPI jumped 3.08 percent on the year. At its quarterly meeting on June 13, the Central Bank of the Republic of China (Taiwan) left its main policy rate unchanged at 2.00 percent, following a surprise rate hike by 12.5 basis points in March tame inflation, which was the first increase in 12 months and took the rate to its highest level since 2008.

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.