Thai headline inflation remains within target band, BoT likely to hike rate by 25 bps in November 2018

Thai headline inflation remained within the Bank of Thailand’s target range for the third straight month. On a year-on-year basis, the consumer price inflation came in at 1.38 percent. On a sequential basis, headline inflation dropped 0.09 percent but core inflation rose 0.11 percent. Both readings were unsurprisingly weaker than in May when the sequential rise was unusually sharp.

Prices either dropped or rose at a subdued rate on a sequential basis in the major components. Declines were particularly prominent in food and transportation costs. However, on an annual basis, transport costs rose 4.14 percent year-on-year, the most rapid since February 2017.

The sequential decline notwithstanding, headline inflation on an annual basis, how now printed in the official target band of 1 percent to 4 percent. It is also accompanied by a strong rebound in growth momentum. According to an ANZ report, Thailand has exited the phase of low growth and inflation.

The Bank of Thailand has moderately hiked its full 2018 headline inflation forecast to 1.1 percent from 1 percent previously. The GDP forecasts for 2018 and 2019 have also been hiked to 4.4 percent and 4.2 percent respectively, from 4.1 percent previously for both years.

“We believe that the BoT will use this period of stronger growth and modestly higher inflation to normalise monetary policy, commencing with a 25bps increase in the policy rate in November 2018”, added ANZ.

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