CPI will rise 1.9% in 2026 if oil prices average US$100: Central bank

Taipei, March 30 (CNA) Taiwan's consumer price index is likely to jump 1.9 percent in 2026 if international crude oil prices increase to an average US$100 per barrel amid the Middle East war, Central Bank Governor Yang Chin-long (楊金龍) said Monday.

However, a spike in crude oil prices to US$95-US$115 per barrel is likely to be short-term, Yang said in a hearing of the Legislature's financial committee, when asked about the impact of rising oil prices.

On Monday, Brent crude oil prices, the global benchmark, rose more than 3.2 percent at one point to top US$116 per barrel, after Iran-backed Houthis fired missiles at Israel from Yemen the previous day.

Citing a preliminary estimate of the central bank, Yang said international crude oil prices could average US$100 per barrel this year, which would send Taiwan's CPI up by 1.9 percent.

While the projected 1.9 percent growth is higher than the central bank's recent estimate of 1.8 percent, it is still below a 2 percent alert set by the bank.

The central bank made the 1.8 percent projection in a quarterly policymaking meeting held on March 19, upgrading its 1.63 percent prediction in December, based on its forecast of an average US$85 per barrel for global crude oil prices in 2026.

On Monday, Yang said the average price of US$85 per barrel forecast for 2026 was in line with the estimates of many research institutions worldwide.

On the question of whether the central bank will raise interest rates to deal with inflationary pressure, Yang said if inflation concerns take hold in Taiwan, the bank would tighten its monetary policy, which would include higher interest rates.

The central bank will continue to monitor the global situation and update its inflation estimate, he added.

In its March 19 meeting, the central bank decided to leave its key interest rates unchanged for the eighth consecutive quarter, with the discount rate at 2 percent, still the highest level in 15 years.

The bank also raised its forecast of Taiwan's gross domestic product (GDP) growth to 7.28 percent from 3.67 percent, citing strong exports and private investments.

Yang said Monday that despite the war in the Middle East, he was cautiously optimistic about the domestic economy.

If the military actions in the Middle East end soon, Taiwan will continue to benefit from massive investments by global cloud service providers amid the AI boom, he said.

The central bank will have more relevant data to make a forecast when it holds its next policymaking meeting in June, he said.