Thai consumer price inflation falls in September, likely to rise modestly in coming months

Thai headline inflation softened in the month of September after recording improvement for three consecutive months. Raw food and energy inflation mainly drove the weakness, although core inflation eased as well. On a year-on-year basis, CPI dropped 0.70 percent.

On a month-on-month basis, headline inflation fell 0.11 percent, the first fall in five months. The drop was driven by lower energy prices, which fell 1.02 percent. Raw food prices also fell a bit by 0.18 percent after a marked rise in August.

Other major components saw small changes. Medical and personal care saw the biggest rise, whereas clothing and footwear, housing, recreation and education were all broadly unchanged. Core inflation rose only a bit by 0.04 percent.

“Looking ahead, inflation is expected to rise modestly as economic activity gradually picks up. August activity data continue to show that the economy is recovering, albeit slowly”, said ANZ in a research report.

However, economic conditions continue to be challenging, especially as the reopening of borders will take place quite gradually. Markedly, the Bank of Thailand recently downgraded its 2021 growth forecast to 3.6 percent from 5 percent. While the policy rate will stay low for a prolonged period, there seems to be little appetite for further rate reductions. Instead, the central bank’s focus now seems to be on providing targeted support aimed at expediting debt restructuring and facilitating credit access.