● Deflation steepened in May, registering thefastest pace in almost 11 years (-3.4% YoY;consensus:-3.2%;Apr:-3.0%), partly attributable to a high base effect

- MoM (0.0%; Apr: -2.0%): prices sustained after three straight months of MoM decline.

- Core inflation (0.0%; Apr: 0.4%): muted inflation, weakest since October 2009.

● The ease in price pressure was broad based, led bypricesofnon-coregoods (-12.3%;Apr:-11.8%), whichcharteda freshrecord low

- Food & non-alcoholic beverages (0.0%; Apr: 1.0%): slowest growth in nearly 2 years, reflecting a high base in the preceding year.

- Housing & furnishing (-5.6%; Apr: -4.6%): fastest decline in over 11 years as the government gave a three-month electricity bills deduction since March 2020.

● Inflation remained benign across regions

- EA (0.1%; Apr: 0.3%): lowest in four years as 12 out of 19 euro area countries recorded a deflation in May amid subdued demand condition.

- KR (-0.3%; Apr: 0.1%): first deflation in eight months on weak energy prices and restricted purchasing activities given the prolonged social distancing measures.

● 2020 CPI forecast retained at -1.0 - 0.0% (YTD: -1.0%; 2019: 0.7%)

- The deflationary pressure seen recently is expected to ease against the backdrop of a gradual economic reopening globally and the recovery in global oil prices, lifted further by expectation of an extended OPEC oil production cut.

- We expect the BoT to pause the easing cycle at the next MPC meeting on 24 June, noting that the domestic COVID-19 development has been favourable and that the BoT has signalled its preference to monitor the effectiveness of the deployed measures.

Source: Kenanga Research - 5 Jun 2020