Thailand on track to meet 2.2% inflation target

But price pressure lingers.

According to DBS, Thailand's CPI inflation came in at 0.22% MoM sa in October, its highest since December 2012. Not that the BOT is going to be too concerned. Bulk of the pressure came from food inflation, which spiked to 0.62% MoM sa from -0.06% previously.

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Core inflation was flat. Indeed, at 1.5% YoY in October, CPI inflation is on course to meet the (average) 2.2% target for 2013.

Still, the BOT will closely watch inflation numbers in the next couple of months. Inflation target for 2014 has been lowered to 2.4% YoY. This remains lower than the medium-term trend of 3-3.5%. Terms of trade have risen significantly from mid-2012 up to mid-2013 and this has capped any pressure from imported inflation.

But this also means that price pressure may build up if the recent moderation in terms of trade were to prevail going into 2014. If anything, on sequential basis, CPI inflation is now nearing the average 0.27% MoM sa seen in the past couple of years.