06.06.2001
Benign inflation may lead to lower rates

• The Consumer Price Index (CPI) fell 0.2% YoY and 0.1% MoM in May, in line with expectations. Amid fragile consumer confidence which has been dampening domestic demand, the goods price index declined 1.6% YoY, resulting in a 1.0% fall Ytd. Services prices continued to go up, gaining 1.5% YoY.

• Food prices posted the largest decline with 2.6%, followed by clothing prices with a fall of 0.9% YoY. Education and entertainment prices increased 3.1% YoY while the transportation index posted 1.4% growth.

• VB Primasia Opinion: We see no inflationary pressure for the remainder of the year amid weak domestic demand and record high unemployment that will more than offset wage increases. We forecast CPI growth of just 0.6% in 2001 following last year's 1.2% growth. Controlled inflation will continue to give more room to Taiwan's Central Bank to further slash its rediscount rate when its board members meet on June 28 for their quarterly meeting.

IrmakSurenkok@Primasia.com +886-[0]2-2547-8873