June's month-on-month inflation rate indicated domestic consumption remained somewhat resilient, although several indicators were less promising, says a Bank of Thailand director.
Mathee: Watching inflation like a hawk
The central bank is not concerned about low inflation since there is no momentum indicating the Thai economy is in a state of deflation, where prices fall while the economy slows down, said Mathee Supapongse, the central bank's senior director of macroeconomic and monetary policy.
The Commerce Ministry on Monday reported June headline inflation of 2.25% year-on-year and core inflation of 0.8%, still in the central bank's inflation targeting range of 0.5% to 3%. On a month-on-month basis, June's headline inflation rose by 0.15%.
Lacklustre local consumption has become a concern for policymakers, as it has been the main economic engine in recent years amid sluggish exports.
With tepid domestic consumption, the central bank recently announced it will trim the country's growth projection from 5.1% on July 19.
The Bank of Thailand also reported the private consumption index, a measure of domestic consumption, contracted by 0.2% year-on-year in May.
The household debt spiral and a decline in new car sales following the expiration of the government's first-time car buyer scheme were dubbed the main causes.
Mr Mathee said the central bank will continue monitoring month-on-month inflation rates to determine whether the interest rate should be cut.
The weaker-than-expected GDP growth in the first quarter of 5.3% year-on-year prompted the central bank's Monetary Policy Committee to cut the policy rate for the first time this year, to 2.5% from 2.75%, at its May 29 meeting.
About the author
- Writer: Pathom Sangwongwanich
Position: Business Reporter