Bank of Thailand unfazed by headline inflation

  • The Bank of Thailand (BoT) expects high headline inflation to be short term and will not pressure monetary policy and the economic recovery.
  • Headline inflation has been rising, mainly due to higher global energy prices, and it is expected to further increase in Dec 21, according to the central bank.
  • The BoT maintains its existing assessment of the headline inflation rate in 2021 at 1% and 1.4% in 2022 and these forecasts remain within the target in the range 1-3% under upside risks, including the elevated global energy prices persisting longer than expected and global supply constraints becoming more prolonged.
  • Headline inflation would increase temporarily owing to supply-side factors, particularly energy prices which would likely decline by early 2022. With this scenario, it is possible the BoT will revise up the headline inflation forecast at the MPC meeting in Dec 21.
  • However, the figure in the revision is unlikely to be a significant number because the inflation would be offset by the government’s subsidies for energy prices and electricity bills, according to the BoT’s Monetary Policy Committee (MPC).
  • Officials from the MPC also said the high inflation factor would not pressure the BoT’s monetary policy and the country’s economic recovery trend.

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