● Deflation returned to an easing mode in October (-0.5% YoY; consensus: -0.5%; Sep: -0.7%)

- MoM (0.0%; Sep: -0.1%): prices remained broadly unchanged.

- Core inflation (0.2%; Sep: 0.3%): softened to a four-month low, suggesting lingering weakness in domestic demand.

● The uptrend was attributable to a smaller fall in prices of non-core goods (-2.4; Sep: -3.2%)

- Transport & communication (-4.3%; Sep: -5.0%): smallest deflation in eight months underpinned by a softer drop in motor fuel prices (-13.8%; Sep:-15.8%).

- Food & non-alcoholic beverages (1.6%; Sep: 1.4%): mainly due to higher prices of vegetables (11.5%; Sep: 9.3%) as crops were damaged by the heavy rainfall.

● Mixed inflationary trend across the advanced and developing economies

- Euro area (-0.3%; Sep: -0.3%): deflation persisted for three straight months, dragged mainly by a steeper decline in energy prices.

- KR (0.1%; Sep: 1.0%): decreased to a four-month low on a one-off government subsidy on smartphone services fees for households.

● 2020 CPI forecast kept unchanged at -1.0 ’ 0.0% (YTD: -0.9%; 2019: 0.7%)

- The easing deflationary trend on the back of expansionary fiscal measures and favourable domestic COVID-19 situation may not be sustainable as the resurgence of global COVID-19 cases weigh down on energy prices and as the intensifying anti-government riots dampen sentiment.

- Amid a limited policy space, the BoT is still expected to keep the policy rate unchanged at 0.50% for the rest of 2020.

Source: Kenanga Research - 6 Nov 2020