BANGKOK : Thailand's May headline inflation rate dropped to its lowest in 21 months due to lower energy and food prices and a high base in 2022, the commerce ministry said on Tuesday, with consumer prices expected to fall further.
The headline consumer price index (CPI) rose 0.53 per cent in May from a year earlier, sharply below a rise of 1.70 per cent forecast in a Reuters poll, and against April's 2.67 per cent year-on-year increase.
It was first time in 21 months when headline inflation fell below the central bank's target range of 1 per cent-3 per cent.
The core CPI index in May rose 1.55 per cent from a year ago, below a forecast increase of 1.6 per cent, and against April's 1.66 per cent rise.
Annual headline inflation is expected to decline further and possibly shrink in June as energy prices were trending downwards from the previous year, ministry official Wichanun Niwatjinda told a press conference.
"In the coming months, inflation could be lower than 0.5 per cent and we may see 0 per cent in some periods," he said.
Headline inflation is expected to be more than 1 per cent in the second quarter year-on-year and lower in the remaining quarters.
The commerce ministry forecast average headline inflation at 1.7 per cent-2.7 per cent this year and will review that projection next month, Wichanun said.
In the January-May period, annual headline inflation was 2.96 per cent, with the core rate at 1.98 per cent, the ministry said.
Last week, Thailand's central bank raised its policy interest rate by a quarter point to 2 per cent. It will next review the rate on Aug. 2.
However, May's lower-than-expected inflation data makes a further rate hike less likely, said Kobsidthi Silpachai, head of capital markets research at Kasikornbank.
"This makes it quite hard for the monetary policy committee to continue marching with another hike any time soon especially now that inflation is below the BOT's inflation target band of 1 per cent to 3 per cent," he said. (This story has been corrected to specify that the headline inflation fell below, and not within, the central bank's target range for the first time in 21 months in paragraph 3)
(Editing by Kanupriya Kapoor)