An inflation rate falling short of the central bank’s targeted range is not a barrier to economic growth, insists the Bank of Thailand.
A central bank statement noted Thailand’s headline inflation over the past 12 months, as well as projections for the next 12 months, remain below the Monetary Policy Committee’s (MPC) target range of 1-3%.
Headline inflation averaged 0.5% over the past 12 months and it is expected to remain low, assuming global crude oil prices stay subdued for a while due to rising supplies, the regulator said.
Under an agreement between the Finance Ministry and the MPC in December 2024, the target inflation range was set at 1-3%.
The central bank issued an open letter to the ministry on the rate missing the target range, partly to communicate with the public and maintain confidence in price stability.
“Inflation was below the target range due to supply-side factors, primarily in the manufacturing sector, and does not pose a hindrance to economic growth,” the central bank stated in its letter.
The weak inflation over the past year was mainly driven by declines in energy and fresh food prices. Energy costs fell in line with global oil prices, noted the regulator.
This trend reflects global economic concerns and ongoing government cost of living relief measures, added the central bank.
“The low inflation does not indicate deflation and has helped ease living costs. It is not expected to trigger a deflationary spiral that would discourage consumers from spending on goods and services in anticipation of further price declines,” noted the regulator.
Despite a slight slowdown, private consumption grew by 2.5% in the first quarter and 2.1% in the second quarter of this year, according to the statement.
The central bank continues to monitor inflation to ensure it is not too high or too low in the medium term, which would affect the economy and the competitive environment.
The regulator said risks include: a slowdown in inflation due to falling prices of goods and services, which could keep medium-term inflation outside the target range; fluctuations in global energy prices caused by geopolitical tensions; and adjustments in production chains and heightened competitive pressures from the evolving trade environment on prices.
According to Commerce Ministry data, the headline consumer price index fell for the sixth consecutive month in September, declining 0.72% year-on-year.
The main contributor was a decrease in energy prices, including electricity and fuel, driven by the government’s cost of living relief measures as well as falling energy prices in the global market.
Core inflation, which does not include energy and fresh food categories, rose by 0.65% year-on-year in September.
From January to September, headline inflation dropped 0.01% year-on-year, with core inflation increasing by 0.9%.