Inflation Could Ease Further As Rice & Oil Prices Have Stabilised

Most of non-Japan Asia has reported September inflation and the region as a whole is showing a further moderation in headline inflation with core within or below the target band of most central banks.

• Non-Japan Asia headline inflation moderated to 1.7% y/y in September from 2.2% with only the Philippines, Korea and Taiwan seeing an increase. The Philippines saw the CPI rise to 6.1% from 5.3% which may drive another rate hike but it was due to higher rice, despite the price cap, and fuel prices. Korea’s increase was also due to higher food and fuel prices but also services.
• Headline CPI ex China eased 1pp in September to be back below 4% at 3.8%, and has returned to the May/June 2023 low helped by some government intervention in food and fuel markets. It is down 2.6pp since the peak in September last year. This is likely to keep the region’s central banks on hold, except possibly the Philippines, but FX developments are likely to mean cuts are delayed to 2024.
• Core inflation was steady at 1.4% in September and excluding China moderated to 2.8% from 3%. While underlying inflation has been slower to come down it also didn’t rise as much as headline last year and continues to suggest that there are yet to be any second-round effects from higher food and fuel prices.
• Rice prices remain elevated but are down 0.8% m/m in October so far. While oil prices are up over 8% since October 6, they are down 3.3% m/m so far. If these trends continue we could see a further moderation in headline inflation going into year end.
• September inflation is assumed to be in line with August for those countries which are yet to report (Singapore, HK, Malaysia).

Source: MNI - Market News/Refinitiv/IMF