Thai headline inflation rises sequentially in May, BoT likely to keep key rate on hold in 2018

Thai headline inflation rose on a sequential basis in May. On a month-on-month basis, the headline consumer price inflation rose 0.56 percent, whereas the core rate came in at 0.17 percent. This was the most rapid rate of rise seen so far in 2018 for both measures.

The upside surprise was in inflation components other than food and transportation. Prices of clothing, personal and healthcare costs as well as recreation rose at faster rates of 0.34 percent year-on-year, 0.71 percent year-on-year, and 0.52 percent year-on-year, respectively.

Their comparative readings for April were 0.11 percent year-on-year, 0.49 percent and 0.46 percent. In this sense, the data imply that mild price pressures are beginning to surface throughout core components, noted ANZ in a research report.

The rise in food and transportation costs also accelerated to 0.74 percent year-on-year and 3.31 percent year-on-year, respectively. Headline inflation has now come in the official target band of 1 percent to 3 percent for a second straight month and is accompanied by a strong rebound in growth momentum. Therefore the data imply that Thailand is finally existing a phrase of low growth and inflation.

Still, the Bank of Thailand might prefer to wait and watch before shifting from the currently accommodative policy stance. Accordingly, the Bank of Thailand is expected to keep the benchmark rate on hold at 1.5 percent throughout 2018, stated ANZ.

“We will however, be closely monitoring the BoT’s inflation forecasts and specifically, if they are revised higher. For a prolonged period, BoT inflation forecasts have either been lowered or maintained”, added ANZ.

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