BANGKOK – Thailand’s consumer-price index continued on an upward trend in May to reach its highest level in 14 months.
Thailand’s headline measure of inflation rose 2.62% in May, compared with 2.45% in the preceding month, driven up by higher food and energy prices, Commerce Ministry data showed Monday.
Core inflation, which excludes volatile energy prices, hit a 17-month high after increasing 1.75% from a year ago—also higher than 1.66% rise in April. The figure remains within the target range of 0.5% to 3%, set by the Bank of Thailand.
The May headline inflation figure was higher than that predicted by economists polled by The Wall Street Journal, whose median forecast was 2.52%. The core CPI figure was slightly lower than the forecast, with economists predicting a rise of 1.78%.
Nearly seven months of political turmoil in Thailand took a turn on May 22 when army chief Gen. Prayuth Chan-ocha staged a coup and set up a new governing body, the National Council for Peace and Order, to administer the country. The move followed months of protests aimed at ousting former Prime Minister Yingluck Shinawatra, who was removed by a court order in early May, accused of abuse of power.
During the first five months of this year, Thailand’s inflation rose 2.21% while core inflation was up 1.4%.
While analysts believe Thailand’s CPI will likely stay elevated, some believe the upward trend may still be capped.
“Rising raw material costs will add some upside to the outlook,” said Fred Gibson, an economist at Moody’s Analytics.
Mr. Gibson noted that country’s ongoing political crisis will drag on domestic demand and keep inflation pressures at bay—a trend he expects to persist through much of 2014.
“Inflation momentum might ease with the National Council for Peace and Order agreeing to cap the diesel fuel and LPG price, pending reforms of the oil and gas price structure,” ANZ Research said.
It is unlikely the sluggish economic conditions will warrant another interest rate cut by the central bank to boost the economy just yet, analysts said.
ANZ Research said it sees no need for the Bank of Thailand to further ease monetary policy in order to pick up the fiscal slack “with the junta placing the economy on the front burner.”
The central bank has cut its benchmark interest rate twice, a total of 50 basis points, since the escalation of the political tensions in November. The rate now stands at 2%. The next monetary policy meeting is set for June 18.
The Commerce Ministry expects the country’s inflation to average 2.25% in the first half of 2014 and 2.4%-2.6% in the second half. For the whole of 2014, the inflation target remains at 2.8 %.
“Our forecasts have already taken consideration the economic policies of the National Council for Peace and Order,” said Amparwon Pichalai, a Commerce Ministry adviser.
Since the coup a week ago, the military has turned its attention to stabilizing the country’s economy, which contracted 2.1% in the first three months of the year from the previous quarter. Gen. Prayuth’s administration has in the past few days outlined Thailand’s budget for the fiscal year beginning October and has met with various economic agencies and ministries to discuss the revival of the economy.
Moody’s Investors Service affirmed Thailand’s long-term issuer ratings at Baa1 on Monday with a stable outlook, citing the country’s strong fundamental credit.