Core inflation still rising

The past few weeks have brought mostly good news on the inflation front, with the headline rate dropping back in most countries in November. Less encouragingly, however, core inflation has continued to rise and is now at multi-year highs in many parts of Asia. While it is likely to remain high by past standards, we expect core inflation to start dropping back over the coming months. “Reopening inflation” in sectors such as hotel stays and recreational activities should start to fall in early 2023 as the lower base begins to drop out of the annual comparison. Slower economic growth, which should help put downward pressure on wages, an easing of supply chain disruptions and lower shipping costs should also help ease upward pressure on prices. With underlying price pressures set to start easing soon and economic growth slowing, central banks across Asia are likely to bring their tightening cycles to an end in early 2023.