Markets had plenty of news to react to during the Asian session, a boost for the Australian dollar was that the Aussie Government decided to drop a major trade dispute against China.
Speaking of China, the world’s second-largest economy released inflation data this morning. China’s annual inflation rate unexpectedly came in at 0.7% in March 2023, compared with February’s print and market consensus of 1.0%.
This was the lowest figure since September 2021, as the cost of both food and non-food eased further on the back of an uneven economic recovery after the removal of the zero-COVID policy.
Food inflation fell to a 10-month low (2.4% vs 2.6% in Feb), due to a steeper drop in the cost of fresh vegetables and despite a faster rise in pork prices. Also, non-food prices continued to ease (0.3% vs 0.6%), linked to further declines in the cost of transport (-1.9% vs 0.1%) and housing (-0.3% vs -0.1%).
By contrast, inflation was unchanged for health (at 1.0%) while cost quickened for education (1.4% vs 1.2%). Core consumer prices, excluding the volatile prices of food and energy, went up 0.7% yoy, after a 0.6% gain in February.
It is also noteworthy that the Chinese CPI on a monthly basis unexpectedly dropped by 0.3%, the second straight month of fall, missing estimates of a flat reading
The Bank of Korea kept its base rate unchanged at 3.5% during its April meeting, holding rates for the second consecutive time as the country continues to grapple with elevated inflation, a slowing domestic economy, and heightened global economic uncertainties.
The decision was widely expected by analysts and was the first time that the central bank has kept the policy rate steady for two successive meetings since it embarked on a tightening campaign in August 2021.
Inflation showed signs of easing in South Korea but has remained above the central bank’s 2% target, leaving the door open for further rate increases. Meanwhile, the nation’s cooling economy is pressuring the central bank to pause it’s tightening campaign.
South Korean exports, which are the country’s main source of growth, contracted on year for a sixth straight month in March due to sluggish demand and higher global interest rates.