Headline CPI Easing But Core Looks Sticky In Some Countries

In the countries that have released March CPI data, inflation has generally moved lower again helped by Ukraine-related base effects and lower energy prices. However, underlying price pressures have proved stickier in Korea and the Philippines.

• Based on current March CPI data, non-Japan Asia ex China inflation should moderate to 5.3% from 5.6% while core only to 3.9% from 4%.
• Korean headline inflation eased to 4.2% in March from 4.8% whereas core remained at 4.8%, close to the 5% peak recorded in January. Oil product prices fell 3.5% m/m but services, core goods and utilities all rose on the month. The BoK meets on Tuesday and is expected to leave rates at 3.5%. (See MNI BoK Preview - April 2023)
• The Indonesian CPI moderated to 5% y/y from 5.5% the previous month, the lowest since August 2022. Core was 2.9% down from 3.1% and the lowest since July 2022. These results should make BI comfortable with its decision to pause rates and mean that they are now on hold for the foreseeable future.
• The Philippines has seen one of the highest inflation rates in the region. In March it eased to 7.6% from 8.6% driven by food prices and transport, and there are now early signs that headline has peaked. However, the core rate rose to 8% from 7.8%, as there remains broad-based strength in non-food prices, indicating that the inflation fight still has some way to go and that the BSP will continue to hike rates.
• Thailand saw a further moderation in price pressures and both headline and core now stand within BoT’s target band. Headline eased to 2.8% and the peak looks like it was 7.9% in August 2022. Core is now 1.7% down from 1.9% in February. BoT is concerned that the tourism recovery expected this year will drive a resurgence in price pressures and given that rates remain low another 25bp is expected in May.