Inflation Remains Subdued, BoT Close To Neutral

August headline CPI inflation rose a stronger than expected 0.9% y/y after 0.4%. Core was in line with forecasts at 0.8% down slightly from 0.9%. Both are below the central bank’s 1% to 3% inflation target range. Inflation remains very low in Thailand but headline appears to have troughed due to rising energy prices.

• Bank of Thailand Governor Sethaput said today that the central bank will revise down its inflation and growth forecasts later this month, thus policy is likely to be unchanged at the BoT meeting on September 27. He said that rates were close to neutral but he is concerned about the impact of El Nino on food prices and the inflationary impact of the new government’s stimulus measures.
• Food prices inflation eased to 0.7% y/y in August from 1.5% as all components moderated except for rice & cereal which rose 2.5% y/y from 1.7%. Non-food prices rose 1% y/y from -0.4% due to higher transport and energy prices. With India’s non-basmati rice export ban and continued tightening in the oil market, rice and energy prices are likely to rise further over the months ahead.