• Deflation persisted at an unchanged rate in January (-0.3% YoY; consensus: -0.4%; Dec: -0.3%)
  • MoM (0.1%; Dec: 0.2%): softened slightly as demand was weighed by the tightened restriction measures amid the second wave of COVID-19 infections.
  • Core inflation (0.2%; Dec: 0.2%): increased at the same pace for five straight months.
  • The CPI data has been rebased to 2019 from 2015.
• Steeper deflation of non-core goods was equally offset by a sustained inflation in core items
  • Food & non-alcoholic beverages (0.6%; Dec: 1.4%): inflation moderated to a six-month low primarily due to lower prices of processed vegetables (3.4%; Dec: 12.1%) following the easing of drought conditions.
  • Transportation & communication (-1.9%; Dec: -3.1%): deflation narrowed to an 11-month low, reflecting the substantial rise in global oil price (USD54.77/barrel; Dec: USD49.99/barrel) as Saudi Arabia announced a voluntary additional production cut of 1m barrels per day.
• Mixed inflation trend across advanced and developing regions
  • ID (1.6%; Dec: 1.7%): decreased marginally following the reimplementation of partial lockdown measures in Java and Bali.
  • Euro area (0.9%; Dec: -0.3%): first inflation in six months underpinned by rising prices in Germany on the back of a reversal in VAT reduction, higher energy prices and a new carbon tax.
• 2021 CPI forecast range kept unchanged (0.7 – 1.3%; 2020: -0.8%)
  • Extended fiscal support, increase in energy prices and the recent gradual relaxation of COVID-19 restrictions are expected to lead to a higher inflationary pressure. However, the rise may be modest in the immediate term as consumer sentiment needs some time to fully recover.
  • The Bank of Thailand (BoT) is expected to stand pat on policy rate (0.5%) underscored by the prospect of further economic recovery, especially with the kick-off of the vaccination program this month, and the BoT’s aim to preserve the limited policy space.

Source: Kenanga Research - 8 Feb 2021