● Headline inflation withered to a 28-month low in October (0.1% YoY; consensus: 0.3%; Sep: 0.3%)

- Remained below the Bank of Thailand’s (BoT) target range of 1.0-4.0% for five straight months.

- MoM: -0.2% (Sep: 0.1%).

- Core inflation: stagnated at 0.4% YoY, second-lowest in almost 10 years, indicating muted demand-pull pressure and sluggish economic activities.

● Lower CPI growth led by falling prices of non-core goods (-0.8%; Sep: 0.0%)

- Transport & communication (-3.4%; Sep: -2.9%): steeper decline as domestic fuel prices fell further on a YoY basis (Gasohol 95: -12.6%; Sep: -10.5%).

- Food & non-alcoholic beverages (2.2%; Sep: 2.5%): softened to its lowest in six months on lower growth of meats and (3.7%; Sep: 5.0%) and vegetables and fruits (6.0%; Sep: 7.0%) prices.

● Subdued inflationary pressure across the advanced and developing economies

- Eurozone (0.7%): dipped to near 3-year low, further below the European Central Bank’s target of 2.0%, due to steeper drop in energy prices.

- Indonesia (3.1%): withered to a 7-month low on cheaper foodstuff prices, in part due to the red chilli harvesting season.

- South Korea (0.0%): muted inflation as falling prices of agricultural goods zeroed out the higher utility prices.

● 2019 CPI forecast maintained at 0.5-1.0% (YTD: 0.7%; 2018: 1.1%)

- Inflationary pressure to remain benign amid cooling global growth, continued uncertainties over the US-China trade feud and rising geopolitical tension.

- Another round of rate cut is expected, with the policy rate settling at 1.25% by year-end as the inflation is envisaged to undershoot the BoT’s target range, coupled with softer domestic activities and enhanced dovish rhetoric portrayed by the BoT through a slash in GDP forecast at its latest policy meeting.

Source: Kenanga Research - 4 Nov 2019