Thailand: Inflation eases in June, raising questions over monetary policy trajectory
June 1, 2018
Consumer prices decreased 0.09% over the previous month in June, contrasting the 0.56% increase recorded in May. June’s print largely reflected lower prices for food and non-alcoholic beverages; raw food and energy; and transportation and communication. These groups carry the biggest weight in the consumer price index, and the steepest drop in prices was recorded in the raw food and energy category. Prices for housing and furnishing, the fourth-biggest category, remained virtually unchanged.
Inflation eased from 1.5% in May to 1.4% in June, moving away from the midpoint of the Bank of Thailand’s 1.0%–4.0% target range. However, June marked the third consecutive month in which inflation was within the target range. The result came in below market analysts’ expectations of inflation remaining at 1.5%. A low inflation environment against a backdrop of increasing global trade tensions and monetary policy normalization in the United States and the European Union has left analysts divided over when the Bank of Thailand is likely to hike rates. The clear majority of FocusEconomics Consensus Forecast panelists do not expect a rate hike in the third quarter of this year. However, the panel is nearly split concerning the possibility of an increase to the monetary policy rate towards the end of the year.
Core inflation, which excludes raw food and energy, remained stable at the prior month’s reading of 0.8% in June.
Author: Jan Lammersen, Economist