Taiwan's inflation rate fell 0.9% in January

This was due to the different timing of the Lunar New Year.

Bank of America Merrill Lynch (BofAML) reported that Taiwan’s inflation rate inched down from 1.2% in December to 0.9% in January.

Food price inflation rose to 0.8% YoY in January from 0.1% in December, whilst non-food price inflation went down from 1.7% to 0.8%.

Energy price inflation also declined to 6.1% YoY in January from 6.2% in December, whilst non-energy price inflation decreased from 1.3% to 0.3%.

According to BofAML, the decrease in CPI was due to the Lunar New Year timing, which will start on February 15 this year, from January 27 in 2017.

“Food and services prices usually increase notably around the LNY time and normalise afterwards. In February, CPI inflation will likely jump against a much lowered comparison base a year ago,” BofAML said.

For 2018, BofAML expects Taiwan’s CPI to increase from 0.6% last year to 1.3%, as it will be driven by improving domestic demand, as well as the tobacco tax.

“The rise of CPI inflation will pull the real interest rate out of the negatively zone, providing a window for potential normalisation of monetary policies,” BofAML added.