Thailand January Inflation Slows on Stronger Baht, Subsidies

Thailand’s inflation slowed in January as a stronger baht made imports cheaper and state subsidies countered higher costs of food and fuel, giving the central bank scope to cut interest rates further.

An index of consumer prices rose 3.39 percent from a year earlier, the Ministry of Commerce said in Nonthaburi province outside Bangkok today, compared with a previously reported 3.63 percent increase in December. The median estimate of 16 economists in a Bloomberg News survey was 3.5 percent.

Prime Minister Yingluck Shinawatra has extended a diesel- tax cut to end-February and asked state agencies to help prevent an acceleration in inflation. The Bank of Thailand held its benchmark interest rate at 2.75 percent for a second meeting last month after a cut and raised its growth forecast for this year to 4.9 percent. The baht touched a 17-month high in January.

“Inflation is a non-issue and the risk on the policy outlook remains on an easing bias,” Usara Wilaipich, a Bangkok- based economist at Standard Chartered Plc, said before the release. “The baht strength will also help limit price rises. We expect a rate cut during the first half of this year.”

Starting with January inflation data, Thailand began using 2011 as the base year instead of 2007, and added more items such as natural gas for vehicles to the index. The survey was based on the previous base-year assumptions.

The baht fell 0.2 percent as of 11:19 a.m. in Bangkok. It was the best gainer last month after the Indian rupee among 11 widely traded Asian currencies tracked by Bloomberg.

Core inflation, which excludes fresh food and fuel costs, was 1.59 percent last month. The central bank uses the measure to guide policy and expects price gains will stay below its target of 3 percent this year, the ceiling also for last year.

Price gains in the first quarter may be 3.3 percent, the Commerce Ministry said today. The Bank of Thailand’s inflation forecast for this year is 2.8 percent. It predicts the core inflation rate may be 1.7 percent.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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