Snap2 March 2018Updated 8 months ago

Thailand: Just keeping afloat

The latest price data dashes the central bank’s hopes of inflation hitting the 1-4% policy target in the coming months

A downside inflation surprise

Thailand’s consumer price inflation surprisingly slowed to 0.4% year-on-year in February from 0.7% in January. The consensus forecast was no change from January’s level. Food and transport prices were the main drags. Core CPI measure at 0.6% was unchanged from January.


CPI inflation in February



The central bank's inflation optimism

Data dashes the Bank of Thailand’s, the central bank, hopes of inflation rising up to the 1-4% medium-term monetary policy target in the coming months. It may get there on a technical ground, the shift to low base in March 2017, rather than an underlying price recovery. The target was raised from 0.5-3% in early 2015, an odd timing when the economy plunged into deflation, and has been hardly achieved since (see chart). Inflation averaged at -0.9% in 2015 followed by a modest recovery to 0.2% in 2016 and then to 0.7% in the last year.

We think it’s now time for the BoT to lower policy inflation target.

A sustained weak domestic spending will keep demand-pull inflation low, while strong Thai baht (THB) mitigates spill over of rising global commodity price. Another year of below-target inflation is the baseline. We are reviewing our 1.1% forecast for 2018 for downward revision. We reiterate our forecast of no change to the BoT rate policy all year.

Inflation and the Bank of Thailand policy

Bloomberg, ING
Bloomberg, ING