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THAILAND: Inflation Returns To Target Allowing BoT To Watch & Wait

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Thai headline CPI inflation ended 2024 within the central bank’s 1-3% corridor – just. December CPI was lower-than-expected with headline at 1.2% y/y up from 0.9%, the highest since May, and core steady at 0.8% y/y, where it has been for four straight months. 

  • The Bank of Thailand (BoT) kept rates unchanged in December after cutting them 25bp in October. It reiterated today that it wants to keep its policy rate around neutral to allow for room to react given the heightened level of uncertainty, especially from overseas. Inflation back within the band, if sustained, should give it room to continue resisting government pressure to cut rates before it is ready. It expects growth to improve to 2.9% this year up from 2.7% in 2024. The next rate decision is February 26.
  • 2024 inflation was very subdued with headline averaging 0.4% but it did improve over the year starting at -1.1% y/y in January. Underlying inflation averaged 0.6% over the year and rose moderately from its 0.36% low in June to 0.77% in September. BoT is forecasting 2025 inflation at 1.1%.
  • Higher fuel prices helped the CPI return to the target band in December and the government expects it to rise further in Q1 due to diesel and food prices, but the increase in the minimum wage is not expected to affect Q1 inflation.
  • Food prices were steady in December at 1.3% y/y but rice & cereal picked up to 1.4% from 0.9%, while meat, eggs & milk fell and fruit & veg remained steady but negative.
  • Non-food inflation picked up to 1.2% y/y from 0.7% driven by transportation as fuel prices rose.  

Thailand CPI y/y%

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Thai headline CPI inflation ended 2024 within the central bank’s 1-3% corridor – just. December CPI was lower-than-expected with headline at 1.2% y/y up from 0.9%, the highest since May, and core steady at 0.8% y/y, where it has been for four straight months. 

  • The Bank of Thailand (BoT) kept rates unchanged in December after cutting them 25bp in October. It reiterated today that it wants to keep its policy rate around neutral to allow for room to react given the heightened level of uncertainty, especially from overseas. Inflation back within the band, if sustained, should give it room to continue resisting government pressure to cut rates before it is ready. It expects growth to improve to 2.9% this year up from 2.7% in 2024. The next rate decision is February 26.
  • 2024 inflation was very subdued with headline averaging 0.4% but it did improve over the year starting at -1.1% y/y in January. Underlying inflation averaged 0.6% over the year and rose moderately from its 0.36% low in June to 0.77% in September. BoT is forecasting 2025 inflation at 1.1%.
  • Higher fuel prices helped the CPI return to the target band in December and the government expects it to rise further in Q1 due to diesel and food prices, but the increase in the minimum wage is not expected to affect Q1 inflation.
  • Food prices were steady in December at 1.3% y/y but rice & cereal picked up to 1.4% from 0.9%, while meat, eggs & milk fell and fruit & veg remained steady but negative.
  • Non-food inflation picked up to 1.2% y/y from 0.7% driven by transportation as fuel prices rose.  

Thailand CPI y/y%

Keep reading...Show less