AI-Driven Inflation Manageable: Central Bank

Taipei: 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. According to Focus Taiwan, in a document released after its quarterly policymaking meeting Thursday, the central bank noted that extensive investment in AI infrastructure by major global cloud service providers has 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, with electricity prices and prices for information processing devices increasing by 4.0 percent and 15.5 percent, respectively. The central bank highlighted that 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. However, electricity and information processing equipment contributed only marginally to overall inflation, with only 0.16 percentage points to CPI growth during January-August, indicating that AI-driven inflationary pressure remained under control. The central bank is optimistic that technological innovation driven by AI will improve productivity and lower unit labor costs by increasing the supply of goods and services, thereby easing inflationary pressure in the long term. AI development has also supported Taiwan's export-oriented economy, particularly benefiting the semiconductor industry due to AI-related demand. Reflecting strong export performance, the central bank on 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 adjusted its 2026 CPI growth forecast from 1.91 percent to 2.03 percent, exceeding the 2-percent alert threshold, due to a surge in international crude o il prices amid geopolitical tensions and rising service costs. The core CPI forecast, excluding vegetables, fruits, and energy, was also raised from 1.90 percent to 2.16 percent. Despite the higher inflation forecasts, the central bank decided to keep its key interest rates unchanged. Central bank Gov. Yang Chin-long explained that Taiwan has a "K-shaped" economy, where resources are distributed unevenly across sectors. He noted that while the tech sector is booming, traditional industries are lagging, and higher interest rates could adversely affect these industries, prompting a cautious approach to monetary policy. 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."