Thai Baht: Benign inflation keeps BoT on hold – Commerzbank

Commerzbank strategists report that Thailand's Consumer Price Index (CPI) slowed to 2.0% year-on-year in July, below expectations. This decline was primarily due to reduced fuel prices at the retail level. Although core CPI has been increasing, the overall inflation remains relatively stable and below government projections. The Bank of Thailand (BoT) is anticipated to maintain its policy rate at 1% through the end of the year, given the subdued demand and manageable price pressures.

July's CPI figures surpassed forecasts, with the actual rate coming in at 2.0% compared to the consensus of 2.4%, marking the lowest reading since March. Despite this, core CPI averaged 0.8% over the first seven months of the year, falling short of the government's annual target of 1.5%. The BoT is expected to maintain its current stance on monetary policy, with no immediate rate adjustments anticipated.

Assistant Governor Don Nakornthab expressed confidence that inflation remains under control, as subdued demand factors may contribute to lower-than-expected inflation. In the foreign exchange market, the USD/THB pair slipped 0.2% to 33.00, marking its lowest level since June 22nd. The Thai baht has strengthened in recent days, buoyed by higher global gold prices.

However, it remains the third worst-performing Asian currency year-to-date. Thailand's baht has depreciated by 4.5% year-to-date, compared to the 1.9% decline experienced by other Asian currencies, excluding Japan.