Taiwan central bank sees CPI rising less than 2%, to apply moderate tightening

By Faith Hung and Liang-sa Loh

TAIPEI (Reuters) - Taiwan's central bank said on Wednesday it expects the consumer price index (CPI) to rise less than 2% this year, and will gradually apply a moderate tightening policy to curb inflation expectations.

Taiwan's CPI rose 3.08% in February to a 19-month high amid higher food prices during the Lunar New Year holiday, although the government said it sees inflation trending down and inflationary pressure easing.

Curbing inflation expectations "would maintain price stability, helping the domestic economy to have stable growth", the central bank said in a report delivered to parliament.

Governor Yang Chin-long will take questions in parliament on Thursday.

Yang has said that Taiwan's increased interest rate cycle may not be over yet, although core inflation is expected to continue to trend down next year.

Taiwan's central bank, at its last quarterly board meeting in December, unanimously decided to keep its policy rate unchanged at 1.875%, where it has stood since last March.

While acknowledging the expected downward trend for core inflation in 2024, the bank did not take the option to increase rates in the future off the table.

The next rate-setting meeting is scheduled for March 21. The central bank sees the island's export-driven economic growth for this year to be better than in 2023, the report said. The bank's net selling of U.S. dollars for 2023 was $2.77 billion, it said.

(Reporting by Faith Hung and Liang-sa Loh; Editing by Christopher Cushing and Michael Perry)