VIEW: JP Morgan Sees Subdued Inflation Keeping BoT On Hold

July inflation remained subdued with headline rising slightly to 0.4% y/y and core easing to 0.9% y/y. JP Morgan note that 3-month momentum softened further. Energy added 0.2pp and core 0.1pp to headline but raw food detracted 0.2pp.

• “We reiterate our view that both headline (0.5-1.0%oya) and core inflation (around 1%oya) profiles will remain subdued for the rest of the year. Following last week’s 25bp hike, we continue to expect the Bank of Thailand (BoT) to stand pat going forward.”
• JP Morgan points out that the reintroduction of the fuel excise tax from July 1 was offset by a subsidy brought in at the same time that keeps fuel prices stable. Also electricity tariff will be lower over September to December which should bring headline CPI down 0.3pp in September.
• “Once again, food prices remained stable last month, despite El Niño concerns, which have already resulted in weaker output and higher crop prices. … To the extent that global prices stay manageable, food CPI should follow suit as well.”