The headline and core inflation in Thailand came below expectations in December. The consumer price inflation slowed to 0.78 percent year-on-year in the month, as compared with the market expectations of 0.99 percent. For the full year of 2017, the headline inflation averaged 0.67 percent, which is close to the central bank’s December forecast of 0.7 percent. But the BoT’s forecast was downwardly revised many times in the course of the year. The Bank of Thailand expects inflation to average 1.1 percent in 2018.
The lower than expected inflation was due to the diminished impact of oil prices. Even if oil price have been bolstering, the high base effect has led to a lower annual change. On a sequential basis, headline CPI inflation declined 0.08 percent due to price contractions in food, apparel, housing and personal and medical care.
Meanwhile, core rate continued to be subdued at 0.62 percent year-on-year, reflecting the lingering weakness in consumption growth. According to an ANZ research report, demand pull pressures are expected to be capped unless employment and income growth widen.
Even if the overall economic activity is gaining strength, the rebound in domestic demand has been gradual. Lacking breadth, bolstering economic activity has yet to raise labor incomes throughout all sectors.
“We expect the BoT to maintain its policy rate at 1.50 percent through 2018. Indeed, the minutes for the monetary policy committee (MPC) meeting on 20 December reiterated the need to continue with an accommodative policy”, added ANZ.
FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest