BoT: Headline inflation likely below projection

Thailand’s headline inflation is likely to be lower than projected this year as global oil prices decline, says the regulator.

However, domestic goods prices are expected to continue rising, according to executives at the Bank of Thailand.

Speaking at the Monetary Policy Forum on Wednesday, Don Nakornthab, assistant governor for monetary policy at the central bank, said headline inflation for 2026 should come in below the regulator’s previous forecast of 2.8%, primarily due to lower oil prices in both global and domestic markets.

According to the central bank, global oil prices have fallen back to pre-war levels, declining from an average of US$65 per barrel to $64 per barrel as of July 6.

In Thailand, the Oil Fuel Fund Board announced reductions in retail fuel prices, effective on Wednesday. Diesel prices were cut by 2.56 baht per litre, while all grades of gasoline were reduced by 2.51 baht per litre.

Although domestic fuel prices have begun to decline, the pass-through of lower energy costs to consumer prices has yet to be fully realised. As a result, goods prices are expected to continue rising for some time.

“Due to price stickiness, prices of certain goods and services are expected to remain elevated, with limited scope for declines, particularly for food away from home,” said Mr Don.

“Some categories are likely to see price reductions, especially public transport fares, including airfares.”

According to the Bank of Thailand’s Retailer Sentiment Index, around 60% of large retailers expect to raise the prices of their goods and services by no more than 10% over the next three months.

The products most likely to see price increases include essential household goods, fresh and dried food, as well as other food and beverages.

The central bank forecasts headline inflation will slow to 1.4% in 2027, supported by easing tensions in the Middle East, the fading impact of El Niño and a high base effect.

Meanwhile, the regulator upgraded its 2026 GDP growth forecast for Thailand to 2.3% from 1.5%, mainly due to government stimulus measures.

“The central bank is likely to have one of the highest GDP growth forecasts for this year at 2.3%,” said Mr Don.

“However, this is not a satisfactory figure because it remains below the economy’s potential growth rate of 2.7%, while the recovery continues to be uneven under a K-shaped growth pattern.”

Surach Tanboon, senior director of the monetary policy department at the regulator, said medium-term inflation expectations are likely to remain within the central bank’s target range of 1-3% for headline inflation.

The central bank also monitors the salience-based inflation index, which reflects consumers’ behavioural inflation expectations, particularly for frequently purchased items such as food.

In addition, the bank monitors the cheapflation index, which tracks the prices of goods commonly consumed by lower-income households. When prices of these goods increase, consumers tend to perceive inflation as being significantly higher than the headline inflation rate, Mr Surach said.

Source – Bangkok News