In February, Taiwan’s CPI inflation had accelerated on back of a temporary surge in vegetable prices. However, CPI is likely to slightly normalize in March, according to Societe Generale. Vegetable prices appear to have reversed less than half of the gain seen in February, added Societe Generale.
“We expect food inflation to have dropped to -1.5% mom from +4.2% mom seen in February”, says Societe Generale.
Moreover, electricity CPI gained strongly in February due to the end of electricity tariff rebates in March 2015, consequently accelerating housing CPI. However, housing CPI is likely to have a negative base effect in March 2016 that will subtract around half of percentage point from headline CPI inflation, noted Societe Generale.
Meanwhile, fuel prices were increased due to rise in crude oil prices. This is expected to counter part of the drop in food and housing CPI, according to Societe Generale.
“Overall, we see headline CPI inflation dropping to 1.6% yoy in March from 2.4% yoy in February”, added Societe Generale.
Due to weak inflationary pressures, given widening output gap and weakening wage growth, core CPI inflation is likely to remain low, below 1%.
