VIEW: JP Morgan Says Core Inflation “Manageable”, BoT On Hold

October CPI came in weaker than expected at -0.3% y/y due to energy deflation. Core was fairly steady rising to 0.7% y/y from 0.6% and food prices were flat. JP Morgan notes that core and food inflation remains “manageable”. It sees the BoT on hold for now.

• In terms of energy, JP Morgan said that “the fall in energy prices (-2.6%m/m, sa; -1.6%oya) in October was a combination of both lower ex-refinery costs and extended fuel subsidies. In addition to the recent electricity tariff cut, lower pump prices should continue to limit cost-push price pressures and anchor inflation expectations going forward.”
• “Our core-core inflation measure, which excludes energy, raw food, and prepared food segments (Figure 5), also continues to point to subdued demand-pull pressures despite the ongoing tourism recovery.”
• “Following today’s weaker-than-expected print, we revise lower our 2023 and 2024 CPI forecasts to 1.3% and 1.6%, respectively. Headline inflation will likely stay below the 1%oya handle through 1Q24 before base effects push overall prices to the 2.0-2.5%oya handle in 2H24.”
• “We continue to expect the Bank of Thailand (BoT) to hold the policy rate at 2.5% in November and through 2024 to observe the impact of stimulative government policies on growth and inflation.”