The CPI for October came in at 1.2% y/y, a touch below the market consensus of 1.3% y/y and our slightly less optimistic estimate. It was the 5.0% m/m drop in fuel prices and fairly low seasonal month-on-month increase in food prices stood behind the drop in the headline number, but the data also indicated that core inflation remained unchanged or dropped gently to 1.3% y/y last month which also means it remained below the lower bound of the current policy range.
Our view: The data confirm that strong economic growth has not yet started to generate significant demand pressure and should definitely push the issue of interest rate hikes forward onto next year’s agenda.