Thai Inflation Hits Target for First Time in Seven Months: Bloomberg

Thailand's inflation rate has returned to the central bank's target range for the first time in seven months, offering the monetary authority some leeway to resist government calls for further rate cuts amid mounting global economic uncertainty.

Consumer prices rose 1.23% year-on-year in December, according to data released by the Commerce Ministry on Monday. This marks the first time since May that inflation has fallen within the Bank of Thailand's (BOT) target range of 1% to 3%.

The December inflation figure, however, still fell short of analysts' median forecast of 1.4%. Full-year inflation averaged a mere 0.4% for 2024.

Core inflation remained relatively unchanged at 0.79%, while consumer prices dipped 0.18% month-on-month in December.

Authorities anticipate inflation exceeding 1% in the first quarter, driven by higher diesel and food prices. The recent minimum wage hike is not expected to significantly impact inflation, according to Poonpong Naiyanapakorn, director-general of the Trade Policy and Strategy Office.

While the return of inflation to the target band aligns with the BOT's previous guidance, the government is pushing for more aggressive action, urging the central bank to stimulate price growth to 2%.

The government and the BOT have been at odds for months over the best approach to revitalize Thailand's economy, which has experienced sluggish growth for nearly a decade. The rate-setting panel is scheduled to meet again on February 26.

In response to government pressure, the BOT maintained a steady rate of 2.25% last month, opting to hold back on further cuts. The central bank has emphasized the need to preserve policy space in light of heightened global uncertainty, adopting a "broadly neutral stance" as inflation moves closer to its target.

The BOT's Assistant Governor Sakkapop Panyanukul, in a briefing to analysts on Monday, reiterated the central bank's commitment to a robust monetary policy stance to address rising uncertainties. He stressed the importance of preserving policy buffers, highlighting the central bank's decision to hold rates steady last month as a key step in navigating upcoming challenges.

The BOT forecasts average inflation of 1.1% this year, with economic growth expected to accelerate to 2.9% from an estimated 2.7% expansion in 2024.

The government, however, remains insistent on more aggressive rate cuts. Finance Minister Pichai Chunhavajira stated last week that further reductions are necessary if economic recovery remains weak.