Thailand saw inflation dipped below zero for the sixth straight month, likely giving the central bank an impetus to cut interest rates this week.
The consumer price index fell 0.72% in September from a year ago, Commerce Ministry data showed on Monday, slower than the median estimate in a Bloomberg survey of economists. On a monthly basis, the index fell 0.03%, also lower than expectations.
Since April, the annual rate of Thai consumer prices has been in negative territory primarily due to state subsidies on energy costs as well as lower fuel and food prices. While officials said falling prices aren’t considered deflationary, economists expect Thai economic growth to slow to zero in the second half of this year.
A combination of easing inflationary pressures and softening economic outlook will help convince Bank of Thailand policymakers to lower borrowing costs for a second straight meeting on Wednesday. The rate decision will be the first under governor Vitai Ratanakorn, who had called for a more accommodative policy before his term started last week.
The majority of economists in a Bloomberg survey expect the Bank of Thailand to reduce its benchmark rate by 25 basis points to 1.25% on Wednesday.“The situation we are facing is an economic slowdown,” Nantapong Chiralerspong, director general of the ministry’s Trade Policy and Strategy Office, told reporters. He reiterated that Thailand isn’t facing deflation as core inflation remains positive.
When excluding prices of volatile components like food and energy, core inflation rose 0.65% in September. That’s still a weaker pace than economists anticipated.
The ministry on Monday lowered its inflation forecast this year to 0%, from a range of 0-1% previously. In addition to subdued economic growth, lower-than-expected inflation rate over the past three quarters and the government’s cost-of-living assistance prompted the revision, Nantapong said.
Recent appreciation of the Thai baht also helped reduce energy and import costs.
Prime Minister Anutin Charnvirakul’s government plans to roll out a stimulus programme to boost consumption later this year. Nantapong expects a “short-term boost” in spending with no significant impact on inflation for the remainder of this year.
Source: theedgemalaysia