Thai headline inflation slowed in the month of February. The consumer price inflation decelerated from 0.68 percent in January to 0.42 percent year-on-year. On a sequential basis, inflation came in at -0.23 percent. This was the third straight month of inflation slowdown. Transport costs and food prices fell on a sequential basis. On a year-on-year basis food prices fell 0.16 percent year-on-year whereas transport costs rose just 0.06 percent year-on-year.
Core inflation rose modestly by 0.63 percent year-on-year and 0.07 percent sequentially. The slow rate of rise in core inflation not only shows on-going slack in the economy but also structural factors such as the rising share of the e-commerce market and growing automation in production.
According to the Bank of Thailand, these structural developments have restricted the pass-through from producer to consumer prices. The strength of the THB is believed to be suppressing imported inflation.
Going forward, the recently approved supplementary budget for fiscal year 2018 along with rises in the minimum wage rise from April is expected to stimulate domestic demand. Even so, inflation is expected to rise at a very gradual rate, noted ANZ in a research report.
“Accordingly, we do not expect the BoT to increase its policy rate at least through 2018”, added ANZ.
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