Thailand September CPI inflation creeps higher than estimates; conditions ripe for policy normalization

Thailand’s CPI inflation for September at 1.33 percent y/y (0.29 percent m/m) was higher than the forecast of 1.21 percenr y/y. With this print, headline inflation has now been in the Bank of Thailand’s (BoT) target range for a sixth consecutive month.

Core inflation at 0.80 percent y/y was however, and to some extent, suggests that demand pull price pressures are finally starting to build up, even if moderately. On a m/m basis, several key components of the non-food CPI basket increased at a faster pace than in August.

Key amongst these were housing (0.06 percent m/m), transportation (0.72 percent m/m) and recreation and education (0.03 percent m/m). Price increases in these categories quickened the sequential increase in Core CPI to 0.14 percent m/m from 0.01 percent m/m previously.

Food prices however, increased at a slower pace of 0.28 percent m/m compared with 0.51 percent m/m previously and had a dampening effect on headline inflation.

"Combined with the fact that headline CPI has now been in the BoT’s target range of 1-4 percent for six consecutive months, the case for policy normalisation is strong. We continue to expect the BoT to hike its policy rate by 25bps to 1.75 percent in November," ANZ Research commented in its latest report.