TAIPEI: Taiwan's consumer prices dropped for an 11th month in December as retailers discounted products to attract customers, giving the central bank room to maintain interest rates at a record low to revive the economy.

Prices declined 0.21 percent from a year earlier, the statistics bureau said in Taipei yesterday. The median estimate in a Bloomberg News survey of seven economists was for a 0.04 percent increase. Consumer prices fell a revised 1.61 percent in November from a year earlier.

The absence of inflation allowed Taiwan's central bank to keep the benchmark interest rate at a record-low 1.25 percent since February 2009 to spur a recovery from the island's deepest recession. Consumer prices will be "subdued" in the next three months, Governor Perng Fai-nan told reporters on December 24 after leaving borrowing costs unchanged for a fourth meeting.

"The governor is signaling that he will keep rates unchanged because inflationary pressure is weak," said Mill Lin, an economist at Chinatrust Commercial Bank in Taipei.

Jing-Jan Retail Business Co offered discounts after opening its new shopping mall in Taipei on December 25. Talees Department Store in Kaohsiung, the island's southern port city, extended last year's annual sale period to December.

Taiwan's gross domestic product shrank 1.29 percent in the three months through September, the least in a year. The inflation report was released after the close of trading on the local stock exchange. The Taiex index rose 3.55, or less than 0.1 percent, to 8,211.40 at the close of Taipei trading, a fourth day of gains and reaching the highest level since June 18, 2008.

China Daily/Bloomberg News

(HK Edition 01/06/2010 page2)