BANGKOK: Thailand’s inflation returned to the central bank’s target range for the first time in seven months, giving monetary authorities scope to fend off government calls for more rate cuts as global uncertainties mount.
Consumer prices rose 1.23% in December from a year ago, according to data released by the Commerce Ministry on Monday (Jan 6). The gauge, which has stayed below 1% for most of 2024, hit the Bank of Thailand’s (BOT) 1 -3% target for the first time since May.
The December print was still below analysts' median expectation for a 1.4% gain. Full-year inflation averaged 0.4%.
Core inflation stood at 0.79%, little changed from 0.8% in November, while consumer prices fell 0.18% month-on-month in December, the ministry said.
Price growth is expected to exceed 1% in the first quarter on higher diesel and food prices, although the minimum wage hike won’t be much of a factor, Poonpong Naiyanapakorn, director general of the Trade Policy and Strategy Office, told a briefing in Bangkok.
While the return of inflation to the target band is line with BOT’s previous guidance, the government wants the central bank to take measures to accelerate price gains to 2%.
The government and BOT have sparred for months over how best to jumpstart Southeast Asia’s second-largest economy after about a decade of lackluster growth. The rate panel next meets on Feb. 26.
Thai rate-setters last month ignored government calls to cut borrowing costs and held the benchmark rate steady at 2.25% after a quarter-point reduction in October. They have underscored the need to preserve policy space amid heightened uncertainties, saying it was appropriate to maintain a "broadly neutral stance” as inflation moves toward the target range.
BOT is under pressure from Prime Minister Paetongtarn Shinawatra’s administration for deeper rate cuts with Finance Minister Pichai Chunhavajira, saying last week that rates need to go down further if economic recovery remains weak.
On Monday, BOT’s Assistant Governor Sakkapop Panyanukul told analysts in a separate briefing that the BOT will stick with its robust monetary policy stance to deal with rising uncertainties. The focus on preserving policy buffer - by holding rates last month - will help combat challenges ahead, he said.
The central bank sees inflation averaging 1.1% this year with economic growth gaining further momentum to 2.9% from an estimated 2.7% expansion in 2024. - Bloomberg
