Key Highlights

  • The general inflation rate for January slowed to 5.02% (YoY) due to a decrease in energy prices following lower fuel and electricity costs, influenced by last year's high base, and a slowdown in fresh food prices, particularly pork. Meanwhile, the core inflation rate decreased to 3.04% (YoY) due to lower prices in the food category, particularly vegetable oil. However, prices for certain goods and services, such as public transport fares and personal care items, continued to rise.
  • Although inflation is expected to continue slowing, partly due to last year's high base, the prices of many goods and services are still gradually increasing due to high production costs. It is anticipated that the average inflation rate in the first half of the year will exceed the target range of 1-3%, which will support the Bank of Thailand's gradual increase of the policy interest rate by 25 bps at a time, reaching 2.0% within the first half of the year.

The general inflation rate for January stands at 5.02% (YoY), growing at a slower rate compared to the previous month’s 5.89% (YoY), and slightly below analysts' expectations of 5.12%  [1] due to the slower growth in energy prices at 11.08% (YoY) compared to December's 14.62% (YoY), influenced by fuel and electricity prices from last year's high base, and a slowdown in fresh food prices at 7.32% (YoY) compared to 8.91% (YoY) in the previous month, mainly due to lower pork prices compared to last year. However, prices for vegetables and fruits increased due to higher demand during the Chinese New Year festival.

The core inflation rate decreased to 3.04% (YoY) compared to 3.23% (YoY) in the previous month, influenced by the slowdown in food prices, particularly vegetable oil. Nevertheless, there are several goods and services that have seen price increases, including public transport fares and personal care items.

Implication:

  •  Despite the continuous slowdown in inflation, it is expected to remain above the target range of 1-3% in the first half of the year. The January inflation rate's decline is partly due to last year's high base, such as electricity costs and ready-to-eat food prices. However, the prices of these goods continue to rise gradually. Additionally, several goods and services have seen price increases compared to the previous month, including non-alcoholic beverages, public transport fares, housing costs such as rent, healthcare and personal services like personal care items, and entertainment such as pet food and movie tickets. These prices are likely to continue rising due to high production costs, especially electricity costs that have increased since January, along with the ongoing demand recovery from the tourism sector, which may further support price increases.
    • It is expected that the inflation rate, which is likely to remain above the target range, will support the Bank of Thailand in gradually raising the policy interest rate by 25 bps at a time, reaching 2.0% in the first half of the year.

[1] Source: Reuter Polls (as of February 2023)