AI-driven inflation manageable: Central bank

Taipei, Sept. 19 (CNA) Inflationary pressure driven by artificial intelligence (AI) remains manageable in Taiwan, the central bank said Thursday, adding that wider adoption of AI is expected to boost productivity and eventually help ease inflationary pressure.

In a document released after its quarterly policymaking meeting Thursday, the central bank said massive investment in AI infrastructure by major cloud service providers in the world had driven up memory chip prices, making technology products like personal computers (PCs) more expensive.

In the United States, personal consumption expenditures rose 3.7 percent in July from a year earlier, while electricity prices and prices for information processing devices increased 4.0 percent and 15.5 percent, respectively, the central bank said.

Electricity and information processing equipment contributed only 0.05 and 0.24 percentage points, respectively, to overall inflation, it added.

In Taiwan, prices of PCs, other computer-related products, and computer software and consumables rose 7.51 percent, 16.94 percent, and 1.66 percent, respectively, year-on-year in the first eight months of this year, according to the central bank.

Taiwan's consumer price index (CPI) rose 2.04 percent in August, the central bank said, while electricity rates increased an average of 4.47 percent from a year earlier in the same month.

Electricity rates and information processing equipment together contributed only 0.16 percentage points to CPI growth during January-August, indicating that AI-driven inflationary pressure remained under control, the bank said.

The central bank said technological innovation driven by AI was expected to improve productivity and lower unit labor costs through an increase in the supply of goods and services, helping ease inflationary pressure in the long term.

AI development has also supported Taiwan's export-oriented economy, with the semiconductor industry in particular benefiting significantly from AI-related demand, the bank said.

Citing strong export performance, the central bank Thursday raised its forecast for Taiwan's gross domestic product (GDP) growth in 2026 to 11.48 percent from its June estimate of 9.45 percent.

The central bank also raised its 2026 CPI growth forecast from 1.91 percent to 2.03 percent, above the 2-percent alert threshold, citing a surge in international crude oil prices amid geopolitical tensions and rising service costs.

Its core CPI forecast, which excludes vegetables, fruits and energy, was raised from 1.90 percent to 2.16 percent, also above the 2 percent thrdshold.

Despite the higher inflation forecasts, the central bank left its key interest rates unchanged.

Speaking to reporters after Thursday's meeting, central bank Gov. Yang Chin-long (楊金龍) said Taiwan had a "K-shaped" economy, with resources distributed unevenly across sectors.

Yang said the tech sector was booming while traditional industries were lagging. Higher interest rates could hurt these industries, he said, explaining why the central bank was taking a cautious approach to monetary policy, he said.

K-shaped growth refers to a divergence in economic performance, with some sectors expanding while others decline, creating a pattern resembling the arms of the letter "K."