May CPI Data Aids BoT June Policy Hold

May headline CPI inflation came in higher than expected at 1.5% y/y after 0.2% in April pushed higher by domestic diesel and food prices. The government expects June CPI to moderate to around 1% due to power subsidies but also lower food prices. The Bank of Thailand (BoT) has said for some time that government subsidies had been keeping headline artificially low and that it focuses on the outlook, thus we expect it to be on hold at the June 12 meeting. Core price pressures remained subdued though and were steady at only 0.4% y/y.

• April was the first month that headline inflation returned to the BoT’s 1-3% target band since April 2023. At its last meeting, BoT forecast 2024 headline and core inflation at 0.6% before picking up to 1.3% and 0.9% respectively in 2025.
• The government has been pressuring the central bank to cut rates, despite its independence, given headline inflation has been negative and the new finance minister Pichai has called for a review of the target band. BoT disagrees and says that the band remains “appropriate” and that soft growth is due to structural factors which monetary policy can’t impact and negative inflation was due to government subsidies and price caps.
• Food prices rose 1.1% y/y in May from 0.3% due to a pick up in most food items including rice & cereals. Non-food rose 1.8% y/y from 0.1% driven by housing and transportation. Energy rose 7.2% from -0.1%.

Source: MNI - Market News/Refinitiv