The Ministry of Commerce's latest inflation data shows that despite continuing over-month increases in consumer product prices since early this year, August's Headline and Core Inflation had slowed to 2.69 percent YoY and 1.76 percent YoY, respectively, from the 2.73 percent YoY and 1.87 percent YoY in July, due to last year's high base.
Regarding the inflation outlook, we at KResearch are keeping our projection on 2012 Headline Inflation unchanged at 3.5 percent (ranging between 3.2-3.7 percent) and Core Inflation at 2.3 percent (ranging between 2.2-2.5 percent). It is unlikely that Core Inflation will exceed 3.0 percent this year, which is at the upper limit of the current BOT inflation-targeting framework of 0.5-3.0 percent. In addition, easing Core Inflation foreseen in the coming months should provide BOT some leeway to reconsider their monetary policy stance if the Thai economy should face significant risks of further slowdown.
However, there are four factors that should be monitored closely since they could drive up the cost of living, including: 1) domestic fuel and other energy prices that may rise with global trends and the government's plan of gradual energy price restructuring; 2) the electric power ‘Ft' charge that will be raised between September-December; 3) prices of certain food items that might be driven directly or indirectly by erratic weather patterns globally; and, 4) rising operating costs that could force producers to raise prices after the Ministry's price control measures end in September of this year.
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