Thai Baht: Benign inflation keeps BoT on hold – Commerzbank

Commerzbank strategists note July Consumer Price Index (CPI) eased to 2.0% year-on-year, below consensus, mainly due to softer retail fuel prices. While core CPI has been gradually rising, overall price pressures are described as manageable and below government forecasts. The Bank of Thailand (BoT) is expected to keep its policy rate at 1% through year-end, with subdued demand limiting the need for tightening.

Soft CPI and steady policy outlook

"July CPI surprised to the downside, rising 2.0% yoy (Bloomberg consensus: 2.4%) vs 2.4% in June, marking the lowest reading since March."

"Nonetheless, price pressures remain manageable, with core CPI averaging 0.8% in the first seven months of the year, below the government's full-year core inflation forecast of 1.5%."

"On monetary policy, Bank of Thailand (BoT) is expected to stay on hold at 1% for the rest of the year. Given the benign inflation backdrop, there is little reason for BoT to tweak monetary policy for now. BoT Assistant Governor Don Nakornthab recently stated that inflation remains under control and could undershoot earlier expectations amid subdued demand-side pressures."

"In FX, USD/THB fell 0.2% to 33.00 yesterday, its lowest level since 22 June. The THB has strengthened over the past four sessions, supported by rising global gold prices. Nonetheless, it remains the third worst-performing Asian currency this year. Year-to-date, THB has fallen 4.5% vs the USD, compared to an average decline of 1.9% for Asian currencies ex-Japan."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)