The pressure on the depreciation of the New Taiwan dollar has increased greatly, which may contribute to inflationary pressure. According to the central bank’s estimates, if the New Taiwan dollar depreciates to 30 yuan against the US dollar, it is estimated that the rate annual growth of the CPI this year rises to 0.16 to 0.33 percentage points, which is transformed in the fourth quarter. Down to 31.92 yuan, the CPI is still within the controllable range.
The central bank said domestic inflation was mainly caused by the surge in international raw materials, known as “imported inflation” In the first eight months of this year, the annual growth rate of US dollar-denominated import prices was 13.85% , while the exchange rate of the New Taiwan dollar against the US dollar in the first eight months was higher than the same period last year. The 3.15% depreciation pushed the annual growth rate of import prices in New Taiwan dollars to 17.70%, an increase by 3.85 percentage points.
The central bank bluntly stated that the depreciation of the New Taiwan dollar will increase the pressure of imported domestic inflation, but the inflation pressure is still within the controllable range, but the impact is relatively limited.
According to the central bank’s estimates, assuming that the New Taiwan dollar exchange rate depreciates from the average price of 28.02 yuan last year to the average price of 29.5 yuan this year, it is estimated that the annual growth rate of CPI this year will increase by 0.12 to 0.25 percentage points If it is further devalued to 30 yuan, the estimate will increase by 0.16 to 0.33 percentage points.
Calculated based on the average exchange rate of the New Taiwan dollar against the US dollar of 29.04 yuan in the first eight months of this year, if the average annual price depreciated to 29.5 yuan, the average price from September to December would be 30.42 yuan, and if it depreciated to 30 yuan, the average price from September to December would be 31.92 yuan, in other words, the New Taiwan dollar depreciated to 31.92 yuan, and inflation is still in the range which can be controlled.
Regarding the New Taiwan dollar exchange rate, Yang Jinlong, President of the Central Bank, emphasized that the exchange rate is determined by market supply and demand. In the past, the New Taiwan dollar was valued at 27 yuan against the dollar. United States, which the market thinks is normal, but now it has depreciated to yuan 31. , but they have confidence in a stable exchange rate.