Headline CPI Generally Peaked But Cost Pass-through Keeping Core Stable

A number of countries have released CPI inflation data for November and generally there has been a moderation in headline inflation while core has remained steady. The exception was the Philippines where both rose further. The sharp drop in global oil prices should put further downward pressure on headline inflation in the region going forward.

• Headline inflation was driven lower in Thailand and Indonesia to 5.5% (from 6%) and 5.4% (from 5.7%) respectively, by easing food prices. Lower crude prices have also helped and should continue to do so with WTI recently reaching lows not seen since January. Taiwan’s CPI moderated to 2.5% from 3%.
• In contrast Korean November inflation fell to 5% from 5.7% due to negative base effects but farm and oil product prices actually rose. The CPI in the Philippines was higher than expected rising to 8% from 7.7% as supply-side issues drove food prices higher.
• Headline inflation appears to have peaked in the countries who have released November data, except for the Philippines. This should mean that Indonesia slows the pace of its rate hikes, Korea may pause and that Thailand continues its gradual tightening. However, increasing price pressures in the Philippines should mean another 50bp hike.
• Core inflation was generally stable but doesn’t appear to have reached a peak yet, as there continues to be an ability to pass on higher input costs to consumers. Thai core CPI in November rose 3.2% y/y (3.2%), Indonesia 3.3% (3.3%), Korea 4.8% (4.8%), Taiwan 2.9% (3.0%) and the Philippines 6.5% (5.9%).

Source: MNI - Market News/Refinitiv/IMF

South-east Asia CPI y/y%

Source: MNI - Market News/Refinitiv