Headline inflation moderated for the second straight month to 1.8% y/y in Oct (from +1.9% in Sep), matching our estimate but coming a tad lower than Bloomberg consensus’ 1.9%. It also marked the lowest inflation rate since Mar 2021, largely due to a further moderation in food price inflation and steady fuel pump prices. This helped to cushion the impact from an uptick in prices of four other components - health, recreation services & culture, education as well as restaurants & hotels. 

We trim our 2023 full-year inflation forecast to 2.5% as year-to-date headline inflation (averaged at 2.7%) has fallen below our previous projection of 2.8%. Additionally, there are no price hike proposals planned for the two remaining reporting months of this year, suggesting that headline inflation will likely continue its downtrend to ~1.7% for the final two months of the year. This downshift in the inflation trajectory has also resulted in an adjustment to our full-year inflation forecast for 2024 to 2.6% (from 2.8% previously), which has factored in the impact of the 2% hike in service tax from Mar 2024 but not the effects of other domestic price policy changes particularly the subsidy rationalization and progressive wage mechanism.