Headline inflation eased to a three-month low in February (0.7% YoY; Jan: 1.1%)

• Came in a tad below consensus’ 0.8% and lower than the Bank of Thailand’s (BoT) target range of 1.0-3.0%.
• MoM: registered a contraction, after two straight months of expansion (-0.1; Jan: 0.2%).
• Core inflation: edged up to a ten-month high (0.6%; Jan: 0.5%), bucking the slowdown in the headline index.

Lower CPI growth led by a weaker growth in prices of non-core goods (1.1%; Jan: 2.6%)

• Transport & communication (-0.5%; Jan: 1.3%): first contraction in three months on drop in crude oil prices, reflecting worries over global oil demand as the COVID-19 outbreak worsened.
• Recreation & education (0.5%; Jan: 0.8%): slowed to a nine-month low mirroring reduced demand for recreational activities amid growing pessimism amongst consumers.

Softer inflationary pressure in most advanced and developing economies

• EA (1.2%; Jan: 1.4%): edged down to a three-month low as the coronavirus epidemic weighed on energy prices.
• KR (1.1%; Jan: 1.5%): eased on falling oil prices and hampered demand conditions amid virus fears.
• PH (2.6%; Jan: 2.9%): trended down for the first time in four months due to lower food and transport costs.

2020 CPI forecast retained at 0.6-0.8% (2019: 0.7%), below the BoT’s target range

• Inflationary pressure to remain tepid as demand conditions and sentiments are increasingly pressured by the COVID-19 outbreak, which is at risk of being designated as a pandemic.
• Coupled with increased probability of a steeper growth moderation in the 1Q20 and possibly 2Q20, we continue to view that the BoT has sufficient room and justification to embark on another 25 basis points rate cut, after slashing it to a record low of 1.00% last month.

Source: Kenanga Research - 6 Mar 2020