Thai headline inflation eases further in January on lower energy prices, likely to come in at 1 pct in 2019

Thai headline inflation slowed down sharply in January. On a year-on-year basis, the consumer price index fell to 0.27 percent from December’s 0.36 percent. The January’s print is lowest in 18 months. The latest figure is also marked the third consecutive month the headline inflation has remained below the Bank of Thailand’s 1 percent to 4 percent target band. The fall was mainly due to lower energy prices, which fell 3.51 percent year-on-year. A recovery in food prices greatly countered the decline in energy prices.

Core inflation remained stable at 0.69 percent year-on-year. The sequential rise was marginal, coming at 0.04 percent. The price changes were usually quite small across the major categories.

“Given that the recent trajectory of oil prices have been weaker than expected, we are lowering our 2019 headline CPI forecast to 1.0 percent, from 1.3 percent”, said ANZ in a research report.

The recent run of soft inflation data implies that the risks to the forecast of 25 basis point rate hike in 2019 are strongly to the downside. Nevertheless, financial stability risks have been a main consideration for the Bank of Thailand.

“A sustained period of low inflation, weakening economic activity and easing concerns about financial stability risks will warrant a re-assessment of our forecast”, added ANZ.