Thai headline inflation rises year-on-year in April, BoT to maintain key policy rate unchanged in 2018

Thai headline inflation rose on a year-on-year basis in April, coming into the official target band after 13 months. The consumer price inflation rose to 1.07 percent year-on-year. On a sequential basis, headline CPI rose 0.45 percent reversing declines in the previous two months. Core inflation rose 0.03 percent sequentially, a slight slowdown from 0.04 percent in the prior month.

April’s rise in headline inflation was mainly driven by higher energy and food prices. Energy prices rose 4.7 percent year-on-year against 3.8 percent previously. Food prices rose 0.7 percent from 0.2 percent in March. Also, a widespread rise was seen in the other major sub components of the CPI basket which has been reflected in the uptick in core inflation.

In spite of the higher print in April, inflation is expected to rise gradually, noted ANZ in a research report. The strength of the Thai baht, slow paced recovery in domestic demand, tepid contribution from the minimum wage rise and structural changes in the economy would keep inflation at the lower end of the inflation target band of 1 percent to 4 percent through 2018.

The Bank of Thailand has recently revised its full year 2018 headline and core inflation forecast lower to 1 percent and 7 percent, respectively.

“Accordingly, we do not expect the BoT to change its accommodative monetary policy stance through 2018. We expect the BoT to maintain the benchmark policy rate at 1.50 percent to further support growth and allow inflation to become more entrenched in the target band”, added ANZ.

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