AI expected to help ease inflationary pressure

Inflationary pressure driven by artificial intelligence (AI) remains manageable in Taiwan, the central bank said on 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 on Thursday, the bank said massive investment in AI infrastructure by major cloud service providers worldwide had driven up memory prices, making technology products such as PCs more expensive.

In the US, 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 bank said.

A woman walks past the central bank logo in Taipei on Thursday.

Photo: CNA

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

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, the bank said.

The consumer price index (CPI) rose 2.04 percent last month, while electricity rates increased an average of 4.47 percent from a year earlier in the same month, it said.

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

The bank said technological innovation driven by AI is 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.

On Thursday, the bank raised its 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 threshold.