ASIA: Inflation Contained, Some Special Factors In February
Non-Japan Asian inflation excluding China remained well contained in February with most countries seeing core and headline inflation within central bank target bands. Headline moderated to 2.4% y/y from 3.0%, the lowest since September 2019. Core was stable at 1.9% y/y for the fourth consecutive month and remains well below the 2023 peak of 4.2% y/y and the OECD aggregate.
- The decline in Asian inflation over the start of 2025 is likely to be reversed in March but lower oil and rice prices should provide a cap. Indonesian headline fell to -0.1% y/y in February from 0.8% y/y due to a temporary 50% discount on electricity rates for some consumers which should be unwound in March. Core continued its upward trend begun at the start of 2024 and is now at 2.5%, Bank Indonesia’s band mid-point.
Non-Japan Asia headline CPI y/y%
- Thailand also saw a modest pickup in core inflation to 1.0% y/y, the highest since June 2023 and the bottom of the Bank of Thailand’s corridor. Core inflation was lower though in other major Asian economies with Korea down 0.1pp to 1.9% y/y and the Philippines -0.2pp to 2.4% y/y, which should allow further monetary easing.
- China is excluded from our Asian inflation aggregate but it slipped back into deflation in February for the first time since the start of last year but it was due to base effects related to Chinese New Year. Weak food price inflation and household consumption also weighed on inflation with services inflation falling 0.4% y/y. Headline fell 0.7% y/y after +0.5% in January and core -0.1% y/y down from +0.6% y/y. With inflation remaining too low, the probability of further stimulus remains high.
Non-Japan Asia core CPI y/y%
Source: MNI - Market News/Refinitiv/IMF
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AUD: A$ Slightly Weaker But Range Trading Ahead Of Wed’s US CPI
AUDUSD fell to a low of 0.6265 following the presidential signing of US tariffs on steel and aluminium imports to begin on March 4 and news that tariffs on chips, pharmaceuticals and cars would now be considered. The pair had risen to around 0.6285 following news of a constructive conversation between Australian PM Albanese and US President Trump. Trump then stated that Australia was being considered for an exemption. AUDUSD is now around 0.6272 to be down moderately on the day. The USD index is 0.1% higher.
- AUDUSD and A$ crosses are range trading as markets wait for Wednesday’s US January CPI data, which is forecast to show a steady headline at 2.9% but a 0.1pp dip in core to 3.1%.
- AUDJPY is 0.1% lower at 95.31 after a trough of 95.08. AUDEUR is slightly down to 0.6090 but off the intraday low of 0.6083. AUDGBP is steady around 0.5076.
- AUDNZD is little changed at 1.1127 after a high of 1.1138 as both Australian and NZ governments spoke to avoid being targeted by US tariffs.
- Equities are mixed with the ASX & Hang Seng up 0.1% but CSI 300 down 0.3% and S&P e-mini -0.2%. Oil prices are higher with WTI +0.3% to $72.55/bbl. Copper is down 0.4% and iron ore is higher at $107-108/t.
- Later US January NFIB small business optimism prints and Fed Chair Powell testifies to the senate and Fed’s Hammack, Williams and Bowman speak. Q4 French unemployment is released and the ECB’s Schnabel appears, and BoE’s Mann & Bailey speak.
MNI EXCLUSIVE: BoJ Consensus On Inflation & Wages Difficult
NEW ZEALAND: NZ More Vulnerable To US Tariffs Than Australia
NZ has come out today and reiterated its close relationship with the US. Its economy is more vulnerable to American protectionism than Australia though, as the US became NZ’s second most important export destination in 2024 overtaking Australia. 12.7% of total NZ exports go to the US compared with 4.6% for Australia, but still around half of that going to China at 25%. On the other side, the US runs a very small trade deficit with NZ of $1.1bn in 2024 and only 0.2% of its imports are from NZ and so it is unlikely to be a tariff target.
NZ merchandise exports by destination % total 2024
