Thailand's inflation forecast dipped to 2.9%

Will it remain muted for the rest of the year?

According to DBS, its 2013 inflation forecast has been revised down to 2.9% from 3.2% previously, while the figure for 2014 remains unchanged at 3.7%.

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Inflation has been muted through the first five months of the year despite pressures from higher minimum wages. Lackluster commodity prices and a relatively strong baht have also helped to keep a lid on inflation.

Going forward,some demand-pull price pressures are likely to materialize the last few months of this year when public infrastructure spending kicksin.

However,the upward trajectory in CPI is still generally going to be muted and we expect the policy rate to be kept unchanged at 2.50% through the rest ofthis yearto help the domestic economy regain momentum lostin 1Q.

The benign inflation printin the coming quartersimplies continued pressure on the Bank of Thailand (BoT) to ease monetary policy. However, elevated property prices and still-robust credit growth numbers suggest that room forfurther easing has become limited. We expect monetary tightening to begin in 2Q14.