March 2011 Consumer Price Index

I’m going to try to catch up with the latest releases by this weekend, and the posts will be scheduled in advance so you don’t have to visit more than once or twice a day .

Based on the latest CPI report, inflation took a pause in March (log annual and monthly changes; 2000=100):

Monthly growth rates flattened, indicating a slowdown in momentum. Annual rates are still high, but that’s just the base effect. Note however that the annual increase in the Pain index (transport + food) is running at twice the annual rate of the overall CPI.

Key to thinking about BNM’s potential response for next month’s Monetary Policy Committee meeting will be the behaviour of core inflation – it’s high enough to potentially trigger an interest rate hike – as well as the rate of credit creation. I think the latter’s probably the more important factor, as subsidy rationalisation will induce only one-time price effects when they are implemented, and crude oil prices have paused at the USD110 level for the past month. In other words, the impetus to increases in the price level are likely to be short lived.

We’ll know more about loan growth when the March figures are released next Friday, but based on data up to February it seems that BNM’s tightening of mortgage loan requirements have taken the edge off property speculation (residential property loans; log monthly changes):

If the March loan data confirms the deceleration, then I think the MPC might hold off an interest rate increase for one more meeting.

Technical Notes:

March 2011 Consumer Price Index Report from the Department of Statistics