ASIA: Muted Core Price Pressures To Allow Central Banks To Ease

Non-Japan Asian CPI inflation remained subdued in August with inflation staying low in China and Thailand, and moderating across the rest of the countries that have released data so far. Inflation approaching or remaining within central bank target bands should allow them to cut rates once the Fed begins, which is widely expected to occur on September 18.

• Non-Japan Asia CPI looks likely to have remained at 1.6% y/y in August with China’s 0.1pp pickup to 0.6% y/y offsetting headline moderations in Korea, Thailand and the Philippines. Excluding China Asian headline inflation likely eased 0.1pp to 2.8% y/y, the lowest since January 2021. We assume August was in line with July for those countries who are yet to release CPI data.
• In terms of core CPI, non-Japan Asia is likely to see a moderation to 0.7% y/y from 0.8%, the lowest in almost 3.5 years. It was pressured by the 0.1pp drop in China to 0.3% y/y, which along with persistent falls in producer prices may prompt further stimulus. Non-Japan Asia ex China underlying inflation is steady at 1.9% y/y, around where it has been for the last six months. Thailand’s core remained very low at 0.6% y/y but 0.1pp higher than July.
• Fresh food prices helped to reduce headline inflation in Indonesia and the Philippines but boosted it in China, Taiwan, Korea and Thailand. 

Non-Japan Asia core CPI y/y%