• Headline inflation slowed in August, registering 0.35% YoY (Jul: 0.83%) below the consensus of 0.40% and remaining below the Bank of Thailand’s (BoT) target range of 1.0% - 3.0%
  
  − MoM (0.07%; Jul: 0.19%): moderated slightly, marking its lowest in three months.
  
  − Core inflation (0.62% YoY; Jul: 0.52%): expanded, reaching a 10-month high.

• Lower inflation due to falling prices in the housing and transportation index
  
  − Housing & furnishing (-0.90%; Jul: -0.85%): marked the lowest level this year, amid subdued demand and tighterfinancial conditions.
  
  − Transportation & communication (-1.01%; Jul: 2.01%): declined for the first time in five months, aided by theongoing diesel subsidy.

• Easing inflation trend across both advanced and developing regions
  
  − Philippines (3.3%; Jul: 4.4%): inflation moderated to a seven-month low, due to slower increase in food prices.
  
  − Euro area (2.2%; Jul: 2.6%): inflation softened in August, reaching the lowest level since July 2021 and reflectingsignificant progress towards the ECB’s 2.0% target.

• We forecast the average headline inflation to reach 0.8% in 2024 (2023: 0.4%)
  
  − Looking ahead, inflation is anticipated to rise gradually, driven by several factors including the ongoing severefloods, escalating geopolitical tensions, and fluctuations in commodity prices. Furthermore, an anticipated boost intourism could contribute to higher inflation towards the 1.0% mark by year-end.
  
  − On the monetary policy front, we expect the BoT to maintain its current interest rate at 2.50% in the near term. Thecurrent monetary policy stance appears well-calibrated to inflationary trends, which are projected to rise moderatelyin 2H24 while remaining within the BoT’s target range of 1.0% to 3.0%. This is further supported by the BoT’soptimistic outlook on economic recovery.

Source: Kenanga Research - 9 Sep 2024