Thai inflation turning negative set to aid more rate cuts
The Bank of Thailand has cut its forecast for gross domestic product growth this year to a range of 1.3 to 2 per cent from its December estimate of 2.9 per cent
[BANGKOK] Thailand’s inflation turned negative for the first time in more than a year on cheaper fuel prices and increased fresh food supplies, creating more room for the central bank to cut rates further to deal with the impact of the trade war.
The consumer price index (CPI) fell 0.22 per cent in April, the first negative print since March last year, according to data released by the Commerce Ministry on Tuesday (May 6). That was more than analysts’ expectation for a 0.1 per cent decline.
Core inflation, which strips out volatile fuel and fresh food prices, rose 0.98 per cent in April, beating economists’ forecast for a 0.9 per cent gain. Consumer prices declined 0.21 per cent month-on-month, the third straight month of negative readings.
Benign inflation may help the Bank of Thailand (BOT) add to its three rate cuts since October as the economy braces for a hit to growth from a 36 per cent tariff threatened on its exports to the US. The central bank has hinted at more easing if needed to contain the fallout of the trade war that is roiling the global economy.
The BOT has cut its forecast for gross domestic product growth this year to a range of 1.3 to 2 per cent from its December estimate of 2.9 per cent, tied to two possible scenarios on how US tariff negotiations go.
“With price pressures weak overall, the recovery in tourism already stalling, and the economy set to be further upended by onerous US tariffs, we expect the Bank of Thailand to cut its key rate by 25 basis points at its meeting on Jun 25,” said Bloomberg Economics’s economist Tamara Mast Henderson.
The Monetary Policy Committee has also slashed the headline inflation forecast to a range of 0.2 to 0.5 per cent, citing a decline in global crude oil prices and government subsidies to alleviate costs of living and business expenses. It has averaged 0.75 per cent in the first four months of the year, according to the Commerce Ministry.
The CPI is likely to remain negative zone in May due to falling fuel prices and continued state subsidies, Poonpong Naiyanapakorn, director general of the Trade Policy and Strategy Office, told a briefing in Bangkok. Although the headline inflation is negative, there were no concerns of a deflation given the firm trend in core prices, he said.
The central bank’s official inflation target for this year is set at a range of 1 to 3 per cent.
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